GAP INC (Form: 10-Q, Received: 06/08/2011 16:48:38)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number 1-7562

THE GAP, INC.

(Exact name of registrant as specified in its charter)


Delaware		94-1697231
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

Two Folsom Street, San Francisco, California		94105
(Address of principal executive offices)		(Zip code)

Registrant’s telephone number, including area code: (415) 427-0100

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.

Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files) Yes þ No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer ¨ Non-accelerated filer ¨ Smaller reporting company ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ¨ No þ

The number of shares of the registrant’s common stock outstanding as of May 31, 2011 was 550,426,338.

THE GAP, INC.

TABLE OF CONTENTS


		Page
	PART I - FINANCIAL INFORMATION

Item 1.	Financial Statements		3

	Condensed Consolidated Balance Sheets as of April 30, 2011, January 29, 2011, and May 1, 2010		3

	Condensed Consolidated Statements of Income for the Thirteen Weeks Ended April 30, 2011 and May 1, 2010		4

	Condensed Consolidated Statements of Cash Flows for the Thirteen Weeks Ended April 30, 2011 and May 1, 2010		5

	Notes to Condensed Consolidated Financial Statements		6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk		27

Item 4.	Controls and Procedures		28

	PART II - OTHER INFORMATION

Item 1.	Legal Proceedings		28

Item 1A.	Risk Factors		28

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		29

Item 6.	Exhibits		30

PART I – FINANCIAL INFORMATION

Item 1.

Financial Statements.

THE GAP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


($ and shares in millions except par value)	April 30, 2011			January 29, 2011			May 1, 2010
ASSETS
Current assets:
Cash and cash equivalents	$	2,417		$	1,561		$	2,056
Short-term investments		50			100			425
Merchandise inventory		1,713			1,620			1,534
Other current assets		690			645			649

Total current assets		4,870			3,926			4,664
Property and equipment, net of accumulated depreciation of $5,111, $5,010, and $4,832		2,559			2,563			2,585
Other long-term assets		598			576			696

Total assets	$	8,027		$	7,065		$	7,945

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	1,053		$	1,049		$	1,052
Accrued expenses and other current liabilities		952			996			894
Income taxes payable		85			50			145

Total current liabilities		2,090			2,095			2,091

Long-term liabilities:
Long-term debt		1,246			—			—
Lease incentives and other long-term liabilities		920			890			947

Total long-term liabilities		2,166			890			947

Commitments and contingencies (see Note 11)
Stockholders’ equity:
Common stock $0.05 par value
Authorized 2,300 shares; Issued 1,106 shares for all periods presented; Outstanding 569, 588, and 667 shares		55			55			55
Additional paid-in capital		2,865			2,939			2,920
Retained earnings		11,934			11,767			11,050
Accumulated other comprehensive income		200			185			146
Treasury stock, at cost (537, 518, and 439 shares)		(11,283	)		(10,866	)		(9,264	)

Total stockholders’ equity		3,771			4,080			4,907

Total liabilities and stockholders’ equity	$	8,027		$	7,065		$	7,945

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

		00000000			00000000
	13 Weeks Ended
($ and shares in millions except per share amounts)	April 30, 2011			May 1, 2010
Net sales	$	3,295		$	3,329
Cost of goods sold and occupancy expenses		1,991			1,928

Gross profit		1,304			1,401
Operating expenses		918			927

Operating income		386			474
Interest expense (reversal)		6			(10	)
Interest income		(1	)		(1	)

Income before income taxes		381			485
Income taxes		148			183

Net income	$	233		$	302


Weighted-average number of shares - basic		583			668
Weighted-average number of shares - diluted		588			676

Earnings per share - basic	$	0.40		$	0.45
Earnings per share - diluted	$	0.40		$	0.45

Cash dividends declared and paid per share	$	0.1125		$	0.10

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

		0000000			0000000
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Cash flows from operating activities:
Net income	$	233		$	302
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		151			166
Amortization of lease incentives		(22	)		(19	)
Share-based compensation		17			27
Tax benefit from exercise of stock options and vesting of stock units		9			7
Excess tax benefit from exercise of stock options and vesting of stock units		(10	)		(8	)
Non-cash and other items		16			13
Deferred income taxes		2			(14	)
Changes in operating assets and liabilities:
Merchandise inventory		(80	)		(58	)
Other current assets and other long-term assets		(42	)		(53	)
Accounts payable		(7	)		16
Accrued expenses and other current liabilities		(106	)		(180	)
Income taxes payable, net of prepaid and other tax-related items		36			132
Lease incentives and other long-term liabilities		34			(2	)

Net cash provided by operating activities		231			329


Cash flows from investing activities:
Purchases of property and equipment		(127	)		(107	)
Purchases of short-term investments		—			(325	)
Maturities of short-term investments		50			125
Change in restricted cash		—			2
Change in other long-term assets		(2	)		—

Net cash used for investing activities		(79	)		(305	)


Cash flows from financing activities:
Proceeds from issuance of long-term debt		1,246			—
Payments of long-term debt issuance costs		(11	)		—
Proceeds from share-based compensation, net of withholding tax payments		28			45
Repurchases of common stock		(518	)		(299	)
Excess tax benefit from exercise of stock options and vesting of stock units		10			8
Cash dividends paid		(66	)		(67	)

Net cash provided by (used for) financing activities		689			(313	)

Effect of foreign exchange rate fluctuations on cash		15			(3	)

Net increase (decrease) in cash and cash equivalents		856			(292	)
Cash and cash equivalents at beginning of period		1,561			2,348

Cash and cash equivalents at end of period	$	2,417		$	2,056


Non-cash investing activities:
Purchases of property and equipment not yet paid at end of period	$	48		$	59

Supplemental disclosure of cash flow information:
Cash paid for interest during the period	$	1		$	—
Cash paid for income taxes during the period	$	94		$	56

See Accompanying Notes to Condensed Consolidated Financial Statements

THE GAP, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1. Basis of Presentation

The Condensed Consolidated Balance Sheets as of April 30, 2011 and May 1, 2010, the Condensed Consolidated Statements of Income for the thirteen weeks ended April 30, 2011 and May 1, 2010, and the Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended April 30, 2011 and May 1, 2010 have been prepared by The Gap, Inc. (the “Company,” “we,” and “our”), without audit. In the opinion of management, such statements include all adjustments (which include only normal recurring adjustments) considered necessary to present fairly our financial position, results of operations, and cash flows as of April 30, 2011 and May 1, 2010 and for all periods presented. The Condensed Consolidated Balance Sheet as of January 29, 2011 has been derived from our audited financial statements.

Beginning July 31, 2010, we included restricted cash in other current assets in the Condensed Consolidated Balance Sheets. Accordingly, restricted cash of $17 million as of May 1, 2010 has been included in other current assets to conform to the current period presentation.

We identify our operating segments based on the way we manage and evaluate our business activities. We have two reportable segments: Stores and Direct.

The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and disclosures normally included in the notes to the annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted from these interim financial statements. We suggest that you read these Condensed Consolidated Financial Statements in conjunction with the Consolidated Financial Statements and notes thereto included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

The results of operations for the thirteen weeks ended April 30, 2011 are not necessarily indicative of the operating results that may be expected for the fifty-two week period ending January 28, 2012.

Note 2. Goodwill and Intangible Assets

Goodwill and intangible assets consist of the following and are included in other long-term assets:


($ in millions)	April 30, 2011			January 29, 2011			May 1, 2010
Goodwill	$	99		$	99		$	99

Trade name	$	54		$	54		$	54

Intangible assets subject to amortization	$	15		$	15		$	15
Less: Accumulated amortization		(13	)		(12	)		(9	)

Intangible assets subject to amortization, net	$	2		$	3		$	6

All of the assets above have been allocated to the Direct reportable segment.

During the thirteen weeks ended April 30, 2011 and May 1, 2010, there were no changes in the carrying amount of goodwill or the trade name. Intangible assets subject to amortization, consisting primarily of customer relationships, are being amortized over a weighted-average amortization period of four years. Amortization expense for intangible assets subject to amortization was $1 million for each of the thirteen week periods ended April 30, 2011 and May 1, 2010 and is recorded in operating expenses in the Condensed Consolidated Statements of Income. For the remainder of fiscal 2011, we expect amortization expense for intangible assets subject to amortization to be $1 million.

As of April 30, 2011, future amortization expense for intangible assets subject to amortization is $1 million for fiscal 2012. Subsequent to fiscal 2012, there will be no amortization expense for existing intangible assets subject to amortization.

Note 3. Debt

In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent notes (the “Notes”) due April 12, 2021 and received proceeds of $1.24 billion in cash, net of underwriting and other fees. The net proceeds are available for general corporate purposes, including repurchases of our common stock. Interest is payable semi-annually on April 12 and October 12 of each year, commencing on October 12, 2011. We have an option to call the Notes in whole or in part at any time at our expense. The Notes agreement is unsecured and does not contain any financial covenants. The amount recorded in long-term debt in the Condensed Consolidated Balance Sheets for the Notes is equal to the aggregate principal amount of the Notes, net of the unamortized discount. The estimated fair value of the Notes was $1.26 billion as of April 30, 2011 and was based on the quoted market price of the Notes as of the last business day of the thirteen week period ended April 30, 2011.

In April 2011, we also entered into a $400 million, five-year, unsecured term loan due April 2016 with an interest rate equal to the London Interbank Offered Rate (“LIBOR”) plus a margin based on our long-term senior unsecured credit ratings. The term loan agreement contains financial and other covenants, including but not limited to limitations on liens and subsidiary debt as well as the maintenance of two financial ratios – a fixed charge coverage ratio and a leverage ratio. Violation of these covenants could result in a default under the term loan agreement, which would require the immediate repayment of outstanding amounts. The loan was funded in May 2011.

In conjunction with our financings, we obtained new long-term senior unsecured credit ratings from Moody’s Investors Service (“Moody’s”) and Fitch Ratings (“Fitch”). Moody’s assigned a rating of Baa3, and Fitch assigned a rating of BBB-. Standard & Poor’s Rating Service (“Standard & Poor’s”) continues to rate us BB+. Any future reduction in the Moody’s and Standard & Poor’s ratings would increase our interest expense related to our $400 million term loan.

Note 4. Fair Value Measurements

Effective January 30, 2011, we adopted enhanced disclosure requirements for fair value measurements. There were no purchases, sales, issuances, or settlements related to recurring level 3 measurements during the thirteen weeks ended April 30, 2011.

There were no transfers into or out of level 1 and level 2 during the thirteen weeks ended April 30, 2011 and May 1, 2010.

Financial Assets and Liabilities

Financial assets and liabilities measured at fair value on a recurring basis and cash equivalents and short-term investments held at amortized cost are as follows:


			Fair Value Measurements at Reporting Date Using
($ in millions)	April 30, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	814	$	—	$	814	$	—
Short-term investments		50		—		50		—
Derivative financial instruments		4		—		4		—
Deferred compensation plan assets		30		30		—		—

Total	$	898	$	30	$	868	$	—

Liabilities:
Derivative financial instruments	$	69	$	—	$	69	$	—


			Fair Value Measurements at Reporting Date Using
($ in millions)	January 29, 2011		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	604	$	—	$	604	$	—
Short-term investments		100		—		100		—
Derivative financial instruments		4		—		4		—
Deferred compensation plan assets		27		27		—		—

Total	$	735	$	27	$	708	$	—

Liabilities:
Derivative financial instruments	$	37	$	—	$	37	$	—


			Fair Value Measurements at Reporting Date Using
($ in millions)	May 1, 2010		Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
Assets:
Cash equivalents	$	1,193	$	50	$	1,143	$	—
Short-term investments		425		175		250		—
Derivative financial instruments		17		—		17		—
Deferred compensation plan assets		25		25		—		—

Total	$	1,660	$	250	$	1,410	$	—

Liabilities:
Derivative financial instruments	$	21	$	—	$	21	$	—

We have highly liquid investments classified as cash equivalents and short-term investments. These investments are classified as held-to-maturity based on our positive intent and ability to hold the securities to maturity. We value these investments at their original purchase prices plus interest that has accrued at the stated rate. The May 1, 2010 fair value table has been updated to include cash equivalents and short-term investments in level 2.

Derivative financial instruments primarily include foreign exchange forward contracts. The principal currencies hedged against changes in the U.S. dollar are Euro, British pounds, Japanese yen, and Canadian dollars. The fair value of the Company’s derivative financial instruments is determined using pricing models based on current market rates. Derivative financial instruments in an asset position are recorded in other current assets or other long-term assets in the Condensed Consolidated Balance Sheets. Derivative financial instruments in a liability position are recorded in accrued expenses and other current liabilities or lease incentives and other long-term liabilities in the Condensed Consolidated Balance Sheets.

We maintain a deferred compensation plan that allows eligible employees to defer compensation up to a maximum amount. Plan investments are recorded at market value and are designated for the deferred compensation plan. The fair value of the Company’s deferred compensation plan assets is determined based on quoted market prices, and the assets are recorded in other long-term assets in the Condensed Consolidated Balance Sheets.

Nonfinancial Assets

We review the carrying value of long-lived assets, including lease rights, key money, and intangible assets subject to amortization, for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. Long-lived assets are considered impaired if the estimated undiscounted future cash flows of the asset or asset group are less than the carrying value. For impaired assets, we recognize a loss equal to the difference between the carrying value of the asset or asset group and its estimated fair value. The estimated fair value of the asset or asset group is based on estimated discounted future cash flows of the asset or asset group using a discount rate commensurate with the risk. The asset group is defined as the lowest level for which identifiable cash flows are available.

There were no material impairment charges recorded for long-lived assets for the thirteen weeks ended April 30, 2011 and May 1, 2010.

We review the carrying value of goodwill and the trade name for impairment annually and whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The impairment review of goodwill involves comparing the fair value of a reporting unit to its carrying amount, including goodwill. If the carrying amount of the reporting unit exceeds its fair value, a second step is required to measure the goodwill impairment loss. The second step includes hypothetically valuing all the tangible and intangible assets of the reporting unit as if the reporting unit had been acquired in a business combination. Then, the implied fair value of the reporting unit’s goodwill is compared to the carrying amount of that goodwill. If the carrying amount of the reporting unit’s goodwill exceeds the implied fair value of the goodwill, we recognize an impairment loss in an amount equal to the excess, not to exceed the carrying amount. A reporting unit is an operating segment or a business unit one level below that operating segment, for which discrete financial information is prepared and regularly reviewed by segment management. We have deemed our reporting unit of goodwill to be our Direct operating segment, which is the level at which segment management regularly reviews operating results and makes resource allocation decisions. The fair value of the reporting unit used to test goodwill for impairment is estimated using the income approach.

The trade name is considered impaired if the estimated fair value of the trade name is less than the carrying value. If the trade name is considered impaired, we recognize a loss equal to the difference between the carrying value and the estimated fair value of the trade name. The fair value of the trade name is determined using the relief from royalty method.

There were no impairment charges recorded for goodwill or the trade name for the thirteen weeks ended April 30, 2011 and May 1, 2010.

Note 5. Derivative Financial Instruments

We operate in foreign countries, which exposes us to market risk associated with foreign currency exchange rate fluctuations. Our risk management policy is to hedge a significant portion of forecasted merchandise purchases for foreign operations, forecasted intercompany royalty payments, and intercompany obligations that bear foreign exchange risk using foreign exchange forward contracts. The principal currencies hedged against changes in the U.S. dollar are Euro, British pounds, Japanese yen, and Canadian dollars. We do not enter into derivative financial contracts for trading purposes. Cash flows from derivative financial instruments are classified as cash flows from operating activities in the Condensed Consolidated Statements of Cash Flows.

Cash Flow Hedges

We designate the following foreign exchange forward contracts as cash flow hedges: (1) forward contracts used to hedge forecasted merchandise purchases denominated primarily in U.S. dollars made by our international subsidiaries whose functional currencies are their local currencies; and (2) forward contracts used to hedge forecasted intercompany royalty payments denominated in Japanese yen and Canadian dollars received by entities whose functional currencies are U.S. dollars. We make merchandise purchases on a monthly basis, and we enter into foreign exchange forward contracts to hedge forecasted merchandise purchases and related costs generally occurring in 12 to 18 months. We make intercompany royalty payments on a quarterly basis, and we enter into foreign exchange forward contracts to hedge intercompany royalty payments generally occurring in 9 to 15 months.

During the thirteen weeks ended April 30, 2011, we entered into and settled treasury rate lock agreements in anticipation of our 5.95 percent fixed-rate Notes of $1.25 billion on April 12, 2011. Prior to the issuance of our Notes, we were subject to changes in interest rates, and we therefore locked into fixed-rate coupons to hedge against the interest rate fluctuations.

There were no material amounts recorded in the Condensed Consolidated Statements of Income for the thirteen weeks ended April 30, 2011 or May 1, 2010 as a result of hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or the discontinuance of cash flow hedges because the forecasted transactions were no longer probable.

Net Investment Hedges

We also use foreign exchange forward contracts to hedge the net assets of international subsidiaries to offset the foreign currency translation and economic exposures related to our investment in the subsidiaries.

There were no amounts recorded in the Condensed Consolidated Statements of Income for the thirteen weeks ended April 30, 2011 or May 1, 2010 as a result of hedge ineffectiveness, hedge components excluded from the assessment of effectiveness, or the discontinuance of net investment hedges.

Not Designated as Hedging Instruments

In addition, we use foreign exchange forward contracts to hedge our market risk exposure associated with foreign currency exchange rate fluctuations for certain intercompany balances denominated in currencies other than the functional currency of the entity with the intercompany balance. The gain or loss on the derivative financial instruments, as well as the remeasurement of the underlying intercompany balances, is recorded in operating expenses in the Condensed Consolidated Statements of Income in the same period and generally offset.

We generate intercompany activity each month, and as such, we generally enter into foreign exchange forward contracts on a monthly basis to hedge intercompany balances that bear foreign exchange risk. These foreign exchange forward contracts generally settle in less than 12 months.

Outstanding Notional Amounts

As of April 30, 2011, January 29, 2011, and May 1, 2010, we had foreign exchange forward contracts outstanding to sell various currencies related to our forecasted merchandise purchases and forecasted intercompany royalty payments and to buy the following notional amounts:


(notional amounts in millions)	April 30, 2011		January 29, 2011		May 1, 2010
U.S. dollars (1)	$	1,020	$	1,025	$	705
British pounds	£	47	£	54	£	18

(1)	The principal currencies hedged against changes in the U.S. dollar were Japanese yen, Canadian dollars, and British pounds.

As of April 30, 2011, January 29, 2011, and May 1, 2010, we had foreign exchange forward contracts outstanding to hedge the net assets of our Japanese subsidiary in the following notional amounts:


(notional amounts in millions)	April 30, 2011		January 29, 2011		May 1, 2010
Japanese yen	¥	3,000	¥	3,000	¥	7,125

As of April 30, 2011, January 29, 2011, and May 1, 2010, we had foreign exchange forward contracts outstanding to buy the following currencies related to our intercompany balances that bear foreign exchange risk:


(notional amounts in millions)	April 30, 2011		January 29, 2011		May 1, 2010
U.S. dollars	$	6	$	12	$	2
British pounds	£	1	£	—	£	—
Japanese yen	¥	5,056	¥	3,238	¥	3,238
Euro	€	14	€	—	€	—

Contingent Features

We had no derivative financial instruments with credit-risk-related contingent features underlying the agreements as of April 30, 2011, January 29, 2011, or May 1, 2010.

Quantitative Disclosures about Derivative Financial Instruments

The fair values of asset and liability derivative financial instruments are as follows:


	April 30, 2011
	Asset Derivatives			Liability Derivatives
($ in millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as cash flow hedges:
Foreign exchange forward contracts	Other current assets	$	—	Accrued expenses and other current liabilities	$	51
Foreign exchange forward contracts	Other long-term assets		1	Lease incentives and other long-term liabilities		8

Total derivatives designated as cash flow hedges			1			59

Derivatives designated as net investment hedges:
Foreign exchange forward contracts	Other current assets		2	Accrued expenses and other current liabilities		3
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		—

Total derivatives designated as net investment hedges			2			3

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		1	Accrued expenses and other current liabilities		6
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		1

Total derivatives not designated as hedging instruments			1			7

Total derivative instruments		$	4		$	69


	January 29, 2011
	Asset Derivatives			Liability Derivatives
($ in millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as cash flow hedges:
Foreign exchange forward contracts	Other current assets	$	—	Accrued expenses and other current liabilities	$	30
Foreign exchange forward contracts	Other long-term assets		2	Lease incentives and other long-term liabilities		2

Total derivatives designated as cash flow hedges			2			32

Derivatives designated as net investment hedges:
Foreign exchange forward contracts	Other current assets		—	Accrued expenses and other current liabilities		—
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		—

Total derivatives designated as net investment hedges			—			—

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		2	Accrued expenses and other current liabilities		5
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		—

Total derivatives not designated as hedging instruments			2			5

Total derivative instruments		$	4		$	37


	May 1, 2010
	Asset Derivatives			Liability Derivatives
($ in millions)	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Derivatives designated as cash flow hedges:
Foreign exchange forward contracts	Other current assets	$	9	Accrued expenses and other current liabilities	$	18
Foreign exchange forward contracts	Other long-term assets		1	Lease incentives and other long-term liabilities		—

Total derivatives designated as cash flow hedges			10			18

Derivatives designated as net investment hedges:
Foreign exchange forward contracts	Other current assets		4	Accrued expenses and other current liabilities		—
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		—

Total derivatives designated as net investment hedges			4			—

Derivatives not designated as hedging instruments:
Foreign exchange forward contracts	Other current assets		3	Accrued expenses and current liabilities		3
Foreign exchange forward contracts	Other long-term assets		—	Lease incentives and other long-term liabilities		—

Total derivatives not designated as hedging instruments			3			3

Total derivative instruments		$	17		$	21

Substantially all of the unrealized gains and losses from designated cash flow hedges as of April 30, 2011 will be recognized in income within the next 12 months at the then current values, which may differ from the fair values as of April 30, 2011 shown above.

See Note 4 of Notes to Condensed Consolidated Financial Statements for disclosures on the fair value measurements of our derivative financial instruments.

The effects of derivative financial instruments on other comprehensive income (“OCI”) and the Condensed Consolidated Statements of Income, on a pre-tax basis, are as follows:


	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Derivatives in cash flow hedging relationships:
Foreign exchange forward contracts	$	(40	)	$	3
Treasury rate lock agreements		1			—

	$	(39	)	$	3


	Amount and Location of Gain (Loss) Reclassified from Accumulated OCI into Income (Effective Portion)
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Derivatives in cash flow hedging relationships:
Foreign exchange forward contracts - Cost of goods sold and occupancy expenses	$	(9	)	$	(8	)
Foreign exchange forward contracts - Operating expenses		(1	)		—

	$	(10	)	$	(8	)


	Amount of Gain (Loss) Recognized in OCI on Derivatives (Effective Portion)
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Derivatives in net investment hedging relationships:
Foreign exchange forward contracts	$	—		$	(2	)


	Amount and Location of Gain (Loss) Recognized in Income on Derivatives
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Derivatives not designated as hedging instruments:
Foreign exchange forward contracts - Operating expenses	$	(5	)	$	2

For the thirteen weeks ended April 30, 2011 and May 1, 2010, there were no amounts of gain or loss reclassified from accumulated OCI into income for derivative financial instruments in net investment hedging relationships, as we did not sell or liquidate (or substantially liquidate) any of our hedged subsidiaries during the periods.

See Note 8 of Notes to Condensed Consolidated Financial Statements for components of comprehensive income, which includes changes in fair value of derivative financial instruments, net of tax, and reclassification adjustments for realized gains and losses on derivative financial instruments, net of tax.

Note 6. Share Repurchases

Share repurchase activity is as follows:

		0000000		0000000
	13 Weeks Ended
($ and shares in millions except average per share cost)	April 30, 2011		May 1, 2010
Number of shares repurchased		24.8		14.3
Total cost	$	548	$	296
Average per share cost including commissions	$	22.09	$	20.63

In November 2009, the Board of Directors authorized $500 million for share repurchases, which was fully utilized by the end of March 2010. In connection with this authorization, we entered into purchase agreements with individual members of the Fisher family (related party transactions). The Fisher family shares were purchased at the same weighted-average market price that we paid for share repurchases in the open market. During the thirteen weeks ended May 1, 2010, approximately 0.5 million shares were repurchased for $10 million from the Fisher family subject to these agreements.

In February 2010, we announced that the Board of Directors authorized $1 billion for share repurchases, which was fully utilized by the end of August 2010. In August 2010, we announced that the Board of Directors authorized an additional $750 million for share repurchases, which was fully utilized by the end of March 2011. In February 2011, we announced a new $2 billion share repurchase authorization, of which $509 million was utilized through April 30, 2011. We have not entered into purchase agreements with members of the Fisher family in connection with these authorizations.

All except $30 million of total share repurchases were paid for as of April 30, 2011. All of the share repurchases were paid for as of January 29, 2011 and May 1, 2010.

Note 7. Share-Based Compensation

Share-based compensation expense recognized in the Condensed Consolidated Statements of Income, primarily in operating expenses, is as follows:


	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Stock units	$	12		$	22
Stock options		4			4
Employee stock purchase plan		1			1

Share-based compensation expense		17			27
Less: Income tax benefit		(6	)		(10	)

Share-based compensation expense, net of tax	$	11		$	17

Note 8. Comprehensive Income

Comprehensive income is comprised of net income and other gains and losses affecting equity that are excluded from net income. The components of OCI consist of foreign currency translation gains and losses, net of tax, changes in the fair value of derivative financial instruments, net of tax, and reclassification adjustments for realized gains and losses on derivative financial instruments, net of tax.

Comprehensive income, net of tax, consists of the following:

		April 30,			April 30,
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Net income	$	233		$	302
Foreign currency translation, net of tax (tax benefit) of $(1) and $-		33			(15	)
Change in fair value of derivative financial instruments, net of tax (taxbenefit) of $(15) and $2		(24	)		1
Reclassification adjustment for realized losses on derivative financial instruments, net of tax benefit of $4 and $3		6			5

Comprehensive income, net of tax	$	248		$	293

Note 9. Income Taxes

The Company conducts business globally, and as a result, files income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. In the normal course of business, we are subject to examination by taxing authorities throughout the world, including such major jurisdictions as the United States, Canada, France, Hong Kong, Japan, and the United Kingdom. We are no longer subject to U.S. federal income tax examinations for fiscal years before 2007, and with few exceptions, we are also no longer subject to U.S. state, local, or non-U.S. income tax examinations for fiscal years before 2001.

As of April 30, 2011, we do not anticipate any significant increases or decreases in total gross unrecognized tax benefits within the next 12 months.

Except where required by U.S. tax law, no provision has been made for U.S. income taxes on the undistributed earnings of our foreign subsidiaries when we intend to utilize those earnings in foreign operations for an indefinite period of time.

During the thirteen weeks ended May 1, 2010, we recognized an interest expense reversal of $11 million from the reduction of interest expense accruals resulting primarily from the filing of a U.S. federal income tax accounting method change application and the resolution of the review conducted by the Internal Revenue Service (“IRS”) with respect to the Company’s federal income tax returns and refund claims for fiscal 2001 through 2004.

Note 10. Earnings Per Share

Weighted-average number of shares used for earnings per share is as follows:

		April 30,		April 30,
	13 Weeks Ended
(shares in millions)	April 30, 2011		May 1, 2010
Weighted-average number of shares - basic		583		668
Common stock equivalents		5		8

Weighted-average number of shares - diluted		588		676

The above computations of weighted-average number of shares – diluted exclude 5 million and 6 million shares related to stock options and other stock awards for the thirteen weeks ended April 30, 2011 and May 1, 2010, respectively, as their inclusion would have an antidilutive effect on earnings per share.

Note 11. Commitments and Contingencies

We have assigned certain store and corporate facility leases to third parties as of April 30, 2011. Under these arrangements, we are secondarily liable and have guaranteed the lease payments of the new lessees for the remaining portion of our original lease obligations at various dates through 2019. The maximum potential amount of future lease payments we could be required to make is approximately $20 million as of April 30, 2011. We recognize a liability for such guarantees when events or changes in circumstances indicate that the loss is probable and the amount of such loss can be reasonably estimated. There was no material liability recorded for the guarantees as of April 30, 2011, January 29, 2011, and May 1, 2010.

We are a party to a variety of contractual agreements under which we may be obligated to indemnify the other party for certain matters. These contracts primarily relate to our commercial contracts, operating leases, trademarks, intellectual property, financial

agreements, and various other agreements. Under these contracts, we may provide certain routine indemnifications relating to representations and warranties (e.g., ownership of assets, environmental or tax indemnifications), or personal injury matters. The terms of these indemnifications range in duration and may not be explicitly defined. Generally, the maximum obligation under such indemnifications is not explicitly stated, and as a result, the overall amount of these obligations cannot be reasonably estimated. Historically, we have not made significant payments for these indemnifications. We believe that if we were to incur a loss in any of these matters, the loss would not have a material effect on our financial condition or results of operations.

As party to a reinsurance pool for workers’ compensation, general liability, and automobile liability, we have guarantees with a maximum exposure of $14 million as of April 30, 2011. We are currently in the process of winding down our participation in the reinsurance pool.

As a multinational company, we are subject to various proceedings, lawsuits, disputes, and claims (“Actions”) arising in the ordinary course of our business. Many of these Actions raise complex factual and legal issues and are subject to uncertainties. As of April 30, 2011, actions filed against us included commercial, intellectual property, customer, employment, and data privacy claims, including class action lawsuits. The plaintiffs in some Actions seek unspecified damages or injunctive relief, or both. Actions are in various procedural stages, and some are covered in part by insurance. As of April 30, 2011, January 29, 2011, and May 1, 2010, we recorded a liability for the estimated loss if the outcome of an Action is expected to result in a loss that is considered probable and reasonably estimable. The amount of liability as of April 30, 2011, January 29, 2011, and May 1, 2010 was not material for any individual Action or in total. Subsequent to April 30, 2011, no information has become available that indicates a material change to our estimate is required.

We cannot predict with assurance the outcome of Actions brought against us. Accordingly, adverse developments, settlements, or resolutions may occur and negatively impact income in the quarter of such development, settlement, or resolution. However, we do not believe that the outcome of any current Action would have a material adverse effect on our results of operations, cash flows, or financial position taken as a whole.

Note 12. Segment Information

We identify our operating segments according to how our business activities are managed and evaluated. All of our operating segments sell a group of similar products – apparel, accessories, and personal care products. We have two reportable segments:

•

Stores – The Stores reportable segment includes the results of the retail stores for Gap, Old Navy, and Banana Republic. We have aggregated the results of all Stores operating segments into one reportable segment because we believe the operating segments have similar economic characteristics.

•

Direct – The Direct operating segment includes the results for our online brands, both domestic and international. Due to the different distribution method associated with the Direct operating segment, Direct is considered a reportable segment.

Net sales by brand, region, and reportable segment are as follows:


($ in millions) 13 Weeks Ended April 30, 2011	Gap			Old Navy			Banana Republic			Other (3)			Total			Percentage of Net Sales
U.S. (1)	$	743		$	1,097		$	460		$	—		$	2,300			70	%
Canada		70			88			43			—			201			6
Europe		161			—			11			15			187			5
Asia		190			—			24			16			230			7
Other regions		—			—			—			29			29			1

Total Stores reportable segment		1,164			1,185			538			60			2,947			89
Direct reportable segment (2)		96			140			41			71			348			11

Total	$	1,260		$	1,325		$	579		$	131		$	3,295			100	%

Sales Growth (Decline)		(1	)%		(4	)%		1	%		28	%		(1	)%

($ in millions) 13 Weeks Ended May 1, 2010	Gap			Old Navy			Banana Republic			Other (3)			Total			Percentage of Net Sales
U.S. (1)	$	788		$	1,163		$	468		$	—		$	2,419			73	%
Canada		73			92			41			—			206			6
Europe		156			—			7			11			174			5
Asia		180			—			24			13			217			7
Other regions		—			—			—			18			18			—

Total Stores reportable segment		1,197			1,255			540			42			3,034			91
Direct reportable segment (2)		79			122			34			60			295			9

Total	$	1,276		$	1,377		$	574		$	102		$	3,329			100	%

Sales Growth		5	%		6	%		7	%		29	%		6	%

(1)	U.S. includes the United States and Puerto Rico.

(2)

In July 2010, we began selling products online to customers in select countries outside the U.S. using a U.S.-based third party that provides logistics and fulfillment services. In August 2010, we began selling products online to customers in select countries outside the U.S. utilizing our own logistics and fulfillment capabilities. For the thirteen weeks ended April 30, 2011, there was $26 million of online sales that were shipped from distribution centers located outside the U.S. For the thirteen weeks ended May 1, 2010, there were no amounts related to online sales that were shipped from distribution centers located outside the U.S.

(3)	Other includes our wholesale business, franchise business, Piperlime, and Athleta.

Gap and Banana Republic outlet retail sales are reflected within the respective results of each brand.

Financial Information for Reportable Segments

Operating income is the primary measure of profit we use to make decisions on allocating resources to our operating segments and to assess the operating performance of each operating segment. It is defined as income before interest expense, interest income, and income taxes. Corporate expenses are allocated to each operating segment and recorded in operating income on a rational and systematic basis.

Reportable segment assets presented below include those assets that are directly used in, or allocable to, that segment’s operations. Total assets for the Stores reportable segment primarily consist of merchandise inventory, the net book value of store assets, and prepaid expenses and receivables related to store operations. Total assets for the Direct reportable segment primarily consist of merchandise inventory, the net book value of information technology and distribution center assets, and the net book value of goodwill and intangible assets as a result of the acquisition of Athleta. We do not allocate corporate assets to our operating segments. Unallocated corporate assets primarily include cash and cash equivalents, short-term investments, the net book value of corporate property and equipment, and tax-related assets.

Selected financial information by reportable segment and reconciliations to our consolidated totals are as follows:


	13 Weeks Ended
($ in millions)	April 30, 2011		May 1, 2010
Operating income:
Stores	$	304	$	402
Direct		82		72

Operating income	$	386	$	474


($ in millions)	April 30, 2011		January 29, 2011		May 1, 2010
Segment assets:
Stores	$	3,402	$	3,264	$	3,225
Direct		537		545		474
Unallocated		4,088		3,256		4,246

Total assets	$	8,027	$	7,065	$	7,945

Net sales by region are allocated based on the location in which the sale was originated. Store sales are allocated based on the location of the store, and online sales are allocated based on the location of the distribution center from which the products were shipped. Net sales generated in the U.S. and in foreign locations are as follows:


	13 Weeks Ended
($ in millions)	April 30, 2011		May 1, 2010
U.S. (1)	$	2,622	$	2,714
Foreign		673		615

Total net sales	$	3,295	$	3,329

(1)	U.S. includes the United States and Puerto Rico.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements within the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. All statements other than those that are purely historical are forward-looking statements. Words such as “expect,” “anticipate,” “believe,” “estimate,” “plan,” “project,” and similar expressions also identify forward-looking statements. Forward-looking statements include, but are not limited to, statements regarding the following:

•

our plans to expand internationally, including additional Gap stores in Europe and China, additional Banana Republic stores in Europe, additional outlet stores in Canada, Europe, and Asia, online sales internationally, and additional franchising and similar arrangements;

•

expected current and estimated future amortization expense for intangible assets;

•

income recognition of unrealized gains and losses from designated cash flow hedges;

•

distributions and repatriations of earnings from foreign subsidiaries;

•

significant increases or decreases in total gross unrecognized tax benefits within the next 12 months;

•

the maximum potential amount of future lease payments;

•

the impact of losses due to indemnification obligations;

•

the maximum exposure for the reinsurance pool in future periods;

•

the outcome of proceedings, lawsuits, disputes, and claims;

•

growing revenues;

•

maintaining a focus on cost management and return on invested capital;

•

generating strong free cash flow and returning excess cash to shareholders;

•

investing in long-term growth;

•

the impact of projected operating losses in China and Hong Kong for fiscal 2011;

•

the effective tax rate in fiscal 2011;

•

current cash balances and cash flows being sufficient to support our business operations, including growth initiatives and planned capital expenditures;

•

ability to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility;

•

target cash balance;

•

maintaining a reserve for unexpected business downturns;

•

maintaining a sound financial policy, strong credit profile, and focus on liquidity;

•

capital expenditures in fiscal 2011;

•

the number of new store openings and store closings in fiscal 2011;

•

net square footage change in fiscal 2011;

•

the number of new franchise store openings in fiscal 2011;

•

dividend payments in fiscal 2011; and

•

the impact of changes in internal controls.

Because these forward-looking statements involve risks and uncertainties, there are important factors that could cause our actual results to differ materially from those in the forward-looking statements. These factors include, without limitation, the following:

•

the risk that changes in general economic conditions or consumer spending patterns will have a negative impact on our financial performance or strategies;

•

the highly competitive nature of our business in the United States and internationally;

•

the risk that we will be unsuccessful in gauging fashion trends and changing consumer preferences;

•

the risk that our efforts to expand internationally may not be successful and could impair the value of our brands;

•

the risk that trade matters, sourcing costs, events causing disruptions in product shipments from China and other foreign countries, or an inability to secure sufficient manufacturing capacity may disrupt our supply chain or operations or impact our financial results;

•

the risk that the impacts of the March 2011 earthquake, tsunami, and nuclear crisis in Japan, including damage to stores and infrastructure, and reduced consumer spending, will have adverse effects on our business, financial position, and strategies;

•

the risk that our franchisees will be unable to successfully open, operate, and grow the Company’s franchised stores;

•

the risk that we will be unsuccessful in identifying, negotiating, and securing new store locations and renewing or modifying leases for existing store locations effectively;

•

the risk that comparable sales and margins will experience fluctuations;

•

the risk that we will be unsuccessful in implementing our strategic, operating, and people initiatives;

•

the risk that changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial results and our ability to service our debt;

•

the risk that updates or changes to our information technology systems may disrupt our operations;

•

the risk that our IT services agreement with IBM could cause disruptions in our operations and have an adverse effect on our financial results;

•

the risk that acts or omissions by our third-party vendors, including a failure to comply with our code of vendor conduct, could have a negative impact on our reputation or operations;

•

the risk that we do not repurchase some or all of the shares we anticipate purchasing pursuant to our repurchase program;

•

the risk that the adoption of new accounting pronouncements will impact future results;

•

the risk that changes in the regulatory or administrative landscape could adversely affect our financial condition and results of operations; and

•

the risk that we will not be successful in defending various proceedings, lawsuits, disputes, claims, and audits.

Additional information regarding factors that could cause results to differ can be found in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011 and our other filings with the U.S. Securities and Exchange Commission.

Future economic and industry trends that could potentially impact net sales and profitability are difficult to predict. These forward-looking statements are based on information as of June 8, 2011, and we assume no obligation to publicly update or revise our forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

We suggest that this document be read in conjunction with Management’s Discussion and Analysis included in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

OUR BUSINESS

We are a global specialty retailer offering apparel, accessories, and personal care products for men, women, children, and babies under the Gap, Old Navy, Banana Republic, Piperlime, and Athleta brands. We have Company-operated stores in the United States, Canada, the United Kingdom, France, Ireland, Japan, and beginning in November 2010, China and Italy. We also have franchise agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in many other countries around the world. Under these agreements, third parties operate or will operate stores that sell apparel and related products under our brand names. In addition, our products are available to customers online in over 90 countries. Most of the products sold under our brand names are designed by us and manufactured by independent sources. We also sell products that are designed and manufactured by branded third parties.

We identify our operating segments based on the way we manage and evaluate our business activities. We have two reportable segments: Stores and Direct.

OVERVIEW

Financial results for the first quarter of fiscal 2011 are as follows:

•

Net sales for the first quarter of fiscal 2011 decreased 1 percent to $3.30 billion, which includes the impact of the March 2011 earthquake and related events in Japan, compared with $3.33 billion for the first quarter of fiscal 2010. Comparable sales, which include the associated comparable online sales, for the first quarter of fiscal 2011 decreased 3 percent compared with a 5 percent increase for the first quarter of fiscal 2010.

•

Direct net sales for the first quarter of fiscal 2011 increased 18 percent to $348 million compared with $295 million for the first quarter of fiscal 2010. Our Direct reportable segment includes sales for each of our online brands.

•

Net sales for Direct and international as a percentage of total net sales for the first quarter of fiscal 2011 increased 3 percent to 24 percent compared with 21 percent for the first quarter of fiscal 2010.

•

Net income for the first quarter of fiscal 2011 decreased 22.8 percent to $233 million compared with $302 million for the first quarter of fiscal 2010, and diluted earnings per share decreased to $0.40 for the first quarter of fiscal 2011 compared with $0.45 for the first quarter of fiscal 2010.

•

During the first quarter of fiscal 2011, we repurchased about 25 million shares for $548 million.

•

During the first quarter of fiscal 2011, we generated free cash flow of $104 million compared with free cash flow of $222 million during the first quarter of fiscal 2010. Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment. For a reconciliation of free cash flow, a non-GAAP financial measure, from a GAAP financial measure, see the Liquidity and Capital Resources section.

•

Our full year business and financial priorities for fiscal 2011 are as follows:

•

grow revenues by consistently delivering product that resonates with our target customers around the world;

•

maintain a focus on cost management and return on invested capital;

•

generate strong free cash flow and return cash to shareholders; and

•

continue to invest in long-term growth.

As we focus on stabilizing revenues in our more mature North America market in fiscal 2011, we also plan to continue growing revenues internationally through the following:

•

opening additional stores, many of which will be outlets, in Canada, Europe, and Asia;

•

continuing to open franchise stores worldwide; and

•

continuing to offer our online shopping experience to customers in international locations.

RESULTS OF OPERATIONS

Net Sales

Net sales primarily consist of retail sales, online sales, and wholesale and franchise revenues.

See Item 1, Financial Statements, Note 12 of Notes to Condensed Consolidated Financial Statements for net sales by brand, region, and reportable segment.

Comparable Sales

Beginning in fiscal 2011, the Company reports comparable (“Comp”) sales including the associated comparable online sales. Accordingly, Comp sales for the thirteen weeks ended May 1, 2010 have been recalculated to conform to fiscal 2011 presentation.

The percentage change in Comp sales by brand and region and for total Company, including the associated comparable online sales, as compared with the preceding year, is as follows:


	13 Weeks Ended
	April 30, 2011			May 1, 2010
Gap North America		(3	)%		3	%
Old Navy North America		(2	)%		6	%
Banana Republic North America		(1	)%		6	%
International		(6	)%		—	%
The Gap, Inc.		(3	)%		5	%

The percentage change in Comp store sales by brand and region and for total Company, excluding the associated comparable online sales, as compared with the preceding year, is as follows:


	13 Weeks Ended
	April 30, 2011			May 1, 2010
Gap North America		(5	)%		2	%
Old Navy North America		(5	)%		7	%
Banana Republic North America		(2	)%		5	%
International		(8	)%		—	%
The Gap, Inc.		(5	)%		4	%

Only Company-operated stores are included in the calculations of Comp sales. Gap and Banana Republic outlet Comp sales are reflected within the respective results of each brand.

A store is included in the Comp sales calculations when it has been open for at least 12 months and the selling square footage has not changed by 15 percent or more within the past year. A store is included in the Comp sales calculations on the first day it has comparable prior year sales. Stores in which the selling square footage has changed by 15 percent or more as a result of a remodel, expansion, or reduction are excluded from the Comp sales calculations until the first day they have comparable prior year sales. Current year foreign exchange rates are applied to both current year and prior year Comp sales to achieve a consistent basis for comparison.

A store is considered non-comparable (“Non-comp”) when it has been open for less than 12 months or has changed its selling square footage by 15 percent or more within the past year.

A store is considered “Closed” if it is temporarily closed for three or more full consecutive days or is permanently closed. When a temporarily closed store reopens, the store will be placed in the Comp/Non-comp status it was in prior to its closure. If a store was in Closed status for three or more days in the prior year, the store will be in Non-comp status for the same days the following year.

Online Comp sales are defined as sales through online channels in regions where we have existing comparable store sales.

Store Count and Square Footage Information

Net sales per average square foot is as follows:


	13 Weeks Ended
	April 30, 2011		May 1, 2010
Net sales per average square foot (1)	$	76	$	77

(1)	Excludes net sales associated with our online, catalog, wholesale, and franchise businesses.

Store count, openings, closings, and square footage for our stores are as follows:


	January 29, 2011		13 Weeks Ended April 30, 2011				April 30, 2011
	Number of Store Locations		Number of Stores Opened		Number of Stores Closed		Number of Store Locations			Square Footage (in millions)
Gap North America		1,111		2		9		1,104			11.1
Gap Europe		184		3		3		184			1.6
Gap Asia		135		4		1		138			1.3
Old Navy North America		1,027		6		12		1,021			18.6
Banana Republic North America		576		—		—		576			4.9
Banana Republic Asia		29		—		1		28			0.2
Banana Republic Europe		5		2		—		7			0.1
Athleta North America		1		—		—		1			—

Company-operated stores total		3,068		17		26		3,059			37.8
Franchise		178		8		—		186			N/A

Total		3,246		25		26		3,245			37.8

Increase (decrease) over prior year								0.4	%		(2.3	)%

	January 30, 2010		13 Weeks Ended May 1, 2010				May 1, 2010
	Number of Store Locations		Number of Stores Opened		Number of Stores Closed		Number of Store Locations			Square Footage (in millions)
Gap North America		1,152		1		10		1,143			11.5
Gap Europe		178		2		1		179			1.6
Gap Asia		120		2		—		122			1.1
Old Navy North America		1,039		3		7		1,035			19.5
Banana Republic North America		576		—		1		575			4.9
Banana Republic Asia		27		—		—		27			0.1
Banana Republic Europe		3		1		—		4			—

Company-operated stores total		3,095		9		19		3,085			38.7
Franchise		136		13		2		147			N/A

Total		3,231		22		21		3,232			38.7

Decrease over prior year								(1.2	)%		(1.8	)%

Gap and Banana Republic outlet stores are reflected in each of the respective brands. We have franchise agreements with unaffiliated franchisees to operate Gap and Banana Republic stores in Asia, Australia, Europe, Latin America, and the Middle East.

We expect to open about 125 new Company-operated store locations and close about 125 Company-operated store locations in fiscal 2011. Through downsizes, we expect net square footage for Company-operated stores to decrease about 2 percent for fiscal 2011. We also expect our franchisees will open about 75 new franchise stores in fiscal 2011.

Net Sales Discussion

Our net sales for the first quarter of fiscal 2011 decreased $34 million, or 1 percent, compared with the prior year comparable period due to a decrease in net sales of $87 million related to our Stores reportable segment, offset by an increase in net sales of $53 million related to our Direct reportable segment.

•

For the Stores reportable segment, our net sales for the first quarter of fiscal 2011 decreased $87 million, or 3 percent, compared with the prior year comparable period. The decrease was primarily due to a decrease in comparable store sales, excluding the associated comparable online sales, of 5 percent for the first quarter of fiscal 2011 compared with the prior year comparable period, partially offset by the favorable impact of foreign exchange of $42 million and an increase in franchise sales. The foreign exchange impact is the translation impact if net sales for the first quarter of fiscal 2010 were translated at exchange rates applicable during the first quarter of fiscal 2011.

•

For the Direct reportable segment, our net sales for the first quarter of fiscal 2011 increased $53 million, or 18 percent, compared with the prior year comparable period. The increase was due to the growth in our online business across all brands and the incremental sales related to the introduction of international online sales in August 2010.

Cost of Goods Sold and Occupancy Expenses

		0000000			0000000
($ in millions)	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Cost of goods sold and occupancy expenses	$	1,991		$	1,928
Gross profit	$	1,304		$	1,401
Cost of goods sold and occupancy expenses as a percentage of net sales		60.4	%		57.9	%
Gross margin		39.6	%		42.1	%

Cost of goods sold and occupancy expenses as a percentage of net sales increased 2.5 percentage points in the first quarter of fiscal 2011 compared with the prior year comparable period.

•

Cost of goods sold increased 2.4 percentage points as a percentage of net sales in the first quarter of fiscal 2011 compared with the prior year comparable period. The increase in cost of goods sold as a percentage of net sales was primarily driven by increased cost of merchandise.

•

Occupancy expenses increased 0.1 percentage points as a percentage of net sales in the first quarter of fiscal 2011 compared with the prior year comparable period. The increase in occupancy expenses as a percentage of net sales was primarily driven by lower net sales.

Operating Expenses

		0000000			0000000
($ in millions)	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Operating expenses	$	918		$	927
Operating expenses as a percentage of net sales		27.9	%		27.8	%
Operating margin		11.7	%		14.2	%

Operating expenses decreased $9 million, but remained about flat as a percentage of net sales, in the first quarter of fiscal 2011 compared with the prior year comparable period. The decrease in operating expenses was mainly due to higher income related to customer credit card usage, partially offset by an increase in marketing expenses.

Interest Expense (Reversal)

		0000000		0000000
($ in millions)	13 Weeks Ended
($ in millions)	April 30, 2011		May 1, 2010
Interest expense (reversal)	$	6	$	(10	)

Interest expense for the first quarter of fiscal 2011 primarily consists of interest expense related to our $1.25 billion long-term debt, which was issued in April 2011.

Interest expense for the first quarter of fiscal 2010 includes an interest expense reversal of $11 million from the reduction of interest expense accruals resulting primarily from the filing of a U.S. federal income tax accounting method change application and the resolution of the IRS’s review of the Company’s federal income tax returns and refund claims for fiscal 2001 through 2004.

Interest Income

		00000000			00000000
($ in millions)	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Interest income	$	(1	)	$	(1	)

Interest income is earned on our cash and cash equivalents and investments. Interest income for the first quarter of fiscal 2011 was flat compared with the prior year comparable period.

Income Taxes

		000000			000000
($ in millions)	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Income taxes	$	148		$	183
Effective tax rate		38.8	%		37.7	%

The increase in the effective tax rate for the first quarter of fiscal 2011 compared with the prior year comparable period was primarily due to projected operating losses in China and Hong Kong for fiscal 2011 (for which no tax benefit has been provided) and their greater impact due to lower expected pre-tax income for fiscal 2011, as well as the projected unfavorable impact of a change in the mix of income between domestic and foreign operations for fiscal 2011.

We currently expect the fiscal 2011 effective tax rate to be about 39 percent. The actual rate will ultimately depend on several variables, including the mix of income between domestic and international operations, the overall level of income, the potential resolution of outstanding tax contingencies, and changes in tax laws and rates.

LIQUIDITY AND CAPITAL RESOURCES

Our largest source of operating cash flows is cash collections from the sale of our merchandise. Our primary uses of cash include merchandise inventory purchases, occupancy costs, personnel-related expenses, purchases of property and equipment, payment of taxes, and share repurchases. In addition to share repurchases, we also continue to return cash to our shareholders in the form of dividends.

In the first quarter, we made the strategic decision to issue debt. Given favorable market conditions and our history of generating consistent and strong operating cash flow, we felt it was the right time to pursue a slightly more optimal capital structure. The Company has generated annual cash flow from operations in excess of $1 billion per year for the past decade and ended fiscal 2010 with $1.7 billion of cash and cash equivalents and short-term investments on its balance sheet. We continue to target a cash balance of $1.2 billion which provides not only for our working capital needs, but also a reserve for unexpected business downturns. We remain committed to maintaining a sound financial policy, strong credit profile, and a focus on liquidity. Proceeds from the debt issuance will be used for general corporate purposes including share repurchases.

In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent Notes due April 12, 2021 and received proceeds of $1.24 billion in cash, net of underwriting and other fees.

In April 2011, we also entered into a $400 million five-year term loan due April 2016 with an interest rate equal to the LIBOR plus a margin based on our long-term senior unsecured credit ratings. The loan was funded in May 2011.

As of April 30, 2011, cash and cash equivalents and short-term investments were $2.5 billion. We believe that current cash balances and cash flows from our operations will be sufficient to support our business operations, including growth initiatives and planned capital expenditures, for the next 12 months and beyond. We are also able to supplement near-term liquidity, if necessary, with our $500 million revolving credit facility.

Cash Flows from Operating Activities

Net cash provided by operating activities during the first quarter of fiscal 2011 decreased $98 million compared with the prior year comparable period, primarily due to the following:

•

a decrease in net income in the first quarter of fiscal 2011 compared with the first quarter in fiscal 2010; and

•

an increase in income tax payments in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010.

We fund inventory expenditures during normal and peak periods through cash flows from operating activities and available cash. Our business follows a seasonal pattern, with sales peaking over a total of about eight weeks during the end-of-year holiday period. The seasonality of our operations may lead to significant fluctuations in certain asset and liability accounts between fiscal year-end and subsequent interim periods.

Cash Flows from Investing Activities

Our cash outflows from investing activities are primarily for capital expenditures and purchases of investments, while cash inflows are primarily proceeds from maturities of investments. Net cash used for investing activities during the first quarter of fiscal 2011 decreased $226 million compared with the prior year comparable period, primarily due to the following:

•

$250 million less net purchases of short-term investments in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010; partially offset by

•

$20 million more purchases of property and equipment in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010.

For fiscal 2011, we expect capital expenditures to be about $575 million.

Cash Flows from Financing Activities

Our cash outflows from financing activities consist primarily of the repurchases of our common stock and dividend payments. Cash inflows primarily consist of proceeds from the issuance of long-term debt. In the first quarter of fiscal 2011, we generated $689 million of cash from financing activities compared with a cash outflow of $313 million in the first quarter of fiscal 2010. The change was primarily due to the following:

•

$1.25 billion of proceeds from our issuance of long-term debt in the first quarter of fiscal 2011; partially offset by

•

$219 million more repurchases of common stock in the first quarter of fiscal 2011 compared with the first quarter of fiscal 2010.

Free Cash Flow

Free cash flow is a non-GAAP financial measure. We believe free cash flow is an important metric because it represents a measure of how much cash a company has available for discretionary and non-discretionary items after the deduction of capital expenditures, as we require regular capital expenditures to build and maintain stores and purchase new equipment to improve our business. We use this metric internally, as we believe our sustained ability to generate free cash flow is an important driver of value creation. However, this non-GAAP financial measure is not intended to supersede or replace our GAAP results.

The following table reconciles free cash flow, a non-GAAP financial measure, from a GAAP financial measure.

		0000000			0000000
	13 Weeks Ended
($ in millions)	April 30, 2011			May 1, 2010
Net cash provided by operating activities	$	231		$	329
Less: Purchases of property and equipment		(127	)		(107	)

Free cash flow	$	104		$	222

Debt

In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent Notes due April 12, 2021 and received proceeds of $1.24 billion in cash, net of underwriting and other fees. The net proceeds are available for general corporate purposes, including repurchases of our common stock. Interest is payable semi-annually on April 12 and October 12 of each year, commencing on October 12, 2011. We have an option to call the Notes in whole or in part at any time at our expense. The Notes agreement is unsecured and does not contain any financial covenants.

In April 2011, we also entered into a $400 million, five-year, unsecured term loan due April 2016 with an interest rate equal to the LIBOR plus a margin based on our long-term senior unsecured credit ratings. The term loan agreement contains financial and other covenants, including but not limited to limitations on liens and subsidiary debt as well as the maintenance of two financial ratios – a fixed charge coverage ratio and a leverage ratio. Violation of these covenants could result in a default under the term loan agreement, which would require the immediate repayment of outstanding amounts. The loan was funded in May 2011.

Credit Facilities

Trade letters of credit represent a payment undertaking guaranteed by a bank on our behalf to pay a vendor a given amount of money upon presentation of specific documents demonstrating that merchandise has shipped. Vendor payables are recorded in the Condensed Consolidated Balance Sheets at the time of merchandise title transfer, although the letters of credit are generally issued prior to this. As of April 30, 2011, we had a $100 million, two-year, unsecured committed letter of credit agreement with an expiration date of September 2012. As of April 30, 2011, we had $1 million in trade letters of credit issued under this letter of credit agreement.

In April 2011, we replaced our existing $500 million, five-year, unsecured revolving credit facility, which was scheduled to expire in August 2012, with a new $500 million, five-year, unsecured revolving credit facility (the “Facility”), which is scheduled to expire in April 2016. The Facility is available for general corporate purposes including working capital, trade letters of credit, and standby letters of credit. The facility usage fees and fees related to the Facility fluctuate based on our long-term senior unsecured credit ratings and our leverage ratio. If we were to draw on the Facility, interest would be a base rate (typically the LIBOR) plus a margin based on our long-term senior unsecured credit ratings and our leverage ratio on the unpaid principal amount. To maintain availability of funds under the Facility, we pay a facility fee on the full facility amount, regardless of usage. As of April 30, 2011, there were no borrowings under the Facility. The net availability of the Facility, reflecting $49 million of outstanding standby letters of credit, was $451 million as of April 30, 2011.

On April 7, 2011, we obtained new long-term senior unsecured credit ratings from Moody’s and Fitch. Moody’s assigned a rating of Baa3, and Fitch assigned a rating of BBB-. Standard & Poor’s continues to rate us BB+. Any future reduction in the Moody’s and Standard & Poor’s ratings would increase our interest expense related to our $400 million term loan and any future interest expense if we were to draw on the Facility.

In September 2010, we entered into two separate agreements to make unsecured revolving credit facilities available for our operations in China (the “China Facilities”). The China Facilities are available for borrowings, overdraft borrowings, and issuances of bank guarantees. The 196 million Chinese yuan (approximately $30 million as of April 30, 2011) China Facilities are scheduled to expire in August 2011. As of April 30, 2011, there were borrowings of $3 million (18 million Chinese yuan) at an interest rate of 6.72 percent under the China Facilities. The net availability of the China Facilities, reflecting these borrowings, was approximately $27 million as of April 30, 2011.

Dividend Policy

In determining whether and at what level to declare a dividend, we consider a number of factors including sustainability, operating performance, liquidity, and market conditions.

We paid a dividend of $0.1125 per share and $0.10 per share during the first quarters of fiscal 2011 and 2010, respectively. We intend to increase our annual dividend, which was $0.40 per share for fiscal 2010, to $0.45 per share for fiscal 2011.

Share Repurchases

In August 2010, we announced that the Board of Directors authorized $750 million for share repurchases, which was fully utilized by the end of March 2011. In February 2011, we announced that the Board of Directors authorized an additional $2 billion for share repurchases, of which $509 million was utilized through April 30, 2011.

During the first quarter of fiscal 2011, we repurchased approximately 24.8 million shares for $548 million, including commissions, at an average price per share of $22.09.

Summary Disclosures about Contractual Cash Obligations and Commercial Commitments

There have been no significant changes to our contractual obligations and commercial commitments as disclosed in our Annual Report on Form 10-K as of January 29, 2011, other than those which occur in the normal course of business and the $1.25 billion Notes discussed above. See Item 1, Financial Statements, Note 11 of Notes to Condensed Consolidated Financial Statements for disclosures on commitments and contingencies.

Critical Accounting Policies and Estimates

There have been no significant changes to our critical accounting policies and estimates as discussed in our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

Item 3.

Quantitative and Qualitative Disclosures About Market Risk.

each year, commencing on October 12, 2011. The amount recorded in long-term debt in the Condensed Consolidated Balance Sheets for the Notes is equal to the aggregate principal amount of the Notes, net of the unamortized discount. The estimated fair value of the Notes was $1.26 billion as of April 30, 2011 and was based on the quoted market price of the Notes as of the last business day of the thirteen week period ended April 30, 2011.

Other than the issuance of Notes described above, our market risk profile as of April 30, 2011 has not significantly changed since January 29, 2011. Our market risk profile as of January 29, 2011 is disclosed in our Annual Report on Form 10-K. See Item 1, Financial Statements, Notes 4 and 5 of Notes to Condensed Consolidated Financial Statements for disclosures on our investments and derivative financial instruments.

Item 4.

Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rule 13a-15(e)) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There was no change in the Company’s internal control over financial reporting that occurred during the Company’s first quarter of fiscal 2011 that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II – OTHER INFORMATION

Item 1.

Legal Proceedings.

Item 1A.

Risk Factors.

Changes in our credit profile or deterioration in market conditions may limit our access to the capital markets and adversely impact our financial results and our ability to service our debt.

In the first quarter of fiscal 2011, given favorable market conditions and our history of generating consistent and strong operating cash flow, we made the strategic decision to issue debt. In April 2011, we issued $1.25 billion aggregate principal amount of 5.95 percent Notes due April 12, 2021. We also entered into a $400 million five-year term loan due April 2016. As a result, we have additional fixed costs that include a coupon payable semiannually on the Notes and annual amortization for the term loan.

Our cash flows from operations are the primary source of funds for these debt service payments. In this regard, we have generated annual cash flow from operations in excess of $1 billion per year for the past decade and ended fiscal 2010 with $1.7 billion of cash and cash equivalents and short-term investments on our balance sheet. We continue to target a cash balance of $1.2 billion which provides not only for our working capital needs, but also a reserve for unexpected business downturns. However, if our cash flows from operations decline significantly, we may be unable to service or refinance our current debt while maintaining our other business initiatives. In addition, the interest rate payable on our term loan is subject to adjustment from time to time with the LIBOR plus a margin based on our long-term senior unsecured credit ratings from Moody’s or Standard & Poor’s. Any future reduction in these ratings would increase our interest costs related to our term loan and could result in reduced access to the credit and capital markets and higher interest costs on future financings.

We remain committed to maintaining a sound financial policy, strong credit profile, and a focus on liquidity. Proceeds from the debt issuance will be used for general corporate purposes including share repurchases.

As of April 30, 2011, the Company had $2.5 billion in cash and cash equivalents and short-term investments. For further information on our credit facilities, see the section entitled “Credit Facilities” in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included as Part I, Item 2 of this Form 10-Q.

There have been no other material changes in our risk factors from those disclosed in Part I, Item 1A, of our Annual Report on Form 10-K for the fiscal year ended January 29, 2011.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds.

The following table presents information with respect to purchases of common stock of the Company made during the thirteen weeks ended April 30, 2011 by The Gap, Inc. or any affiliated purchaser, as defined in Exchange Act Rule 10b-18(a)(3):


	Total Number of Shares Purchased		Average Price Paid Per Share Including Commissions		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or approximate dollar amount) of Shares that May Yet be Purchased Under the Plans or Programs (1)
Month #1 (January 30 - February 26)		—	$	—		—	$	39 million
Month #2 (February 27 - April 2)		13,602,977	$	21.84		13,602,977	$	1,742 million
Month #3 (April 3 - April 30)		11,197,703	$	22.38		11,197,703	$	1,491 million

Total		24,800,680				24,800,680

(1)

On August 19, 2010, we announced that our Board of Directors approved $750 million for share repurchases. This authorization was fully utilized by the end of March 2011. On February 24, 2011, we announced that our Board of Directors approved an additional $2 billion for share repurchases. This authorization has no expiration date.

Item 6.

Exhibits.


1.1		Underwriting Agreement, dated April 7, 2011 in connection with the offering of $1,250,000,000 aggregate principal amount of The Gap, Inc.’s 5.95% Notes due 2021, filed as Exhibit 1.1 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
3.1		Amended and Restated Bylaws of the Company (effective February 17, 2011), filed as Exhibit 3(ii) to Registrant’s Form 8-K on February 18, 2011, Commission File No. 1-7562.
4.1		Indenture dated as of April 12, 2011 by and between The Gap, Inc. and Wells Fargo Bank, National Association, as Trustee, filed as Exhibit 4.1 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
4.2		First Supplemental Indenture dated as of April 12, 2011 relating to the issuance of $1,250,000,000 aggregate principal amount of The Gap, Inc.’s 5.95% Notes due 2021, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
4.3		Form of The Gap, Inc.’s 5.95% Notes due 2021, included as Exhibit A to First Supplemental Indenture, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
10.1*		Release signed by Marka Hansen dated February 1, 2011.
10.2*		Agreement with Art Peck dated January 31, 2011.
10.3		Term Loan and Revolving Credit Agreement dated April 7, 2011, filed as Exhibit 10.1 to Registrant’s Form 8-K on April 7, 2011, Commission File No. 1-7562.
10.4*		Amendment No. 1 to Term Loan and Revolving Credit Agreement dated April 25, 2011.
10.5		Form of Performance Share Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.1 to Registrant’s Form 8-K on March 11, 2011, Commission File No. 1-7562.
10.6		2011 Long-Term Incentive Plan, filed as Appendix A to the Registrant’s definitive proxy statement for its annual meeting of shareholders held on May 17, 2011, Commission File No. 1-7562.
10.7*		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan.
10.8*		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.
10.9*		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan.
10.10*		Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan.
31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1*		Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101^		The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

*	Filed herewith.

Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Section 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities and Exchange Act of 1934, as amended, and otherwise are not subject to liability under those sections.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	THE GAP, INC.

Date: June 8, 2011	By	/s/ Glenn K. Murphy
		Glenn K. Murphy
		Chairman and Chief Executive Officer

Date: June 8, 2011	By	/s/ Sabrina L. Simmons
		Sabrina L. Simmons
		Executive Vice President and Chief Financial Officer

Exhibit Index


1.1		Underwriting Agreement, dated April 7, 2011 in connection with the offering of $1,250,000,000 aggregate principal amount of The Gap, Inc.’s 5.95% Notes due 2021, filed as Exhibit 1.1 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
3.1		Amended and Restated Bylaws of the Company (effective February 17, 2011), filed as Exhibit 3(ii) to Registrant’s Form 8-K on February 18, 2011, Commission File No. 1-7562.
4.1		Indenture dated as of April 12, 2011 by and between The Gap, Inc. and Wells Fargo Bank, National Association, as Trustee, filed as Exhibit 4.1 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
4.2		First Supplemental Indenture dated as of April 12, 2011 relating to the issuance of $1,250,000,000 aggregate principal amount of The Gap, Inc.’s 5.95% Notes due 2021, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
4.3		Form of The Gap, Inc.’s 5.95% Notes due 2021, included as Exhibit A to First Supplemental Indenture, filed as Exhibit 4.2 to Registrant’s Form 8-K on April 12, 2011, Commission File No. 1-7562.
10.1*		Release signed by Marka Hansen dated February 1, 2011.
10.2*		Agreement with Art Peck dated January 31, 2011.
10.3		Term Loan and Revolving Credit Agreement dated April 7, 2011, filed as Exhibit 10.1 to Registrant’s Form 8-K on April 7, 2011, Commission File No. 1-7562.
10.4*		Amendment No. 1 to Term Loan and Revolving Credit Agreement dated April 25, 2011.
10.5		Form of Performance Share Agreement under the 2006 Long-Term Incentive Plan, filed as Exhibit 10.1 to Registrant’s Form 8-K on March 11, 2011, Commission File No. 1-7562.
10.6		2011 Long-Term Incentive Plan, filed as Appendix A to the Registrant’s definitive proxy statement for its annual meeting of shareholders held on May 17, 2011, Commission File No. 1-7562.
10.7*		Form of Restricted Stock Unit Award Agreement under the 2011 Long-Term Incentive Plan.
10.8*		Form of Non-Qualified Stock Option Agreement under the 2011 Long-Term Incentive Plan.
10.9*		Form of Performance Share Agreement under the 2011 Long-Term Incentive Plan.
10.10*		Form of Director Stock Unit Agreement and Stock Unit Deferral Election Form under the 2011 Long-Term Incentive Plan.
31.1*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Executive Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)
31.2*		Rule 13a-14(a)/15d-14(a) Certification of the Chief Financial Officer of The Gap, Inc. (Section 302 of the Sarbanes-Oxley Act of 2002)
32.1*		Certification of the Chief Executive Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2*		Certification of the Chief Financial Officer of The Gap, Inc. pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101^		The following materials from The Gap, Inc.’s Quarterly Report on Form 10-Q for the quarter ended April 30, 2011, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets, (ii) the Condensed Consolidated Statements of Income, (iii) the Condensed Consolidated Statements of Cash Flows, and (iv) Notes to Condensed Consolidated Financial Statements.

*	Filed herewith.

Exhibit 10.1

RELEASE

The Gap Inc. (“Company”) and Marka Hansen (“Executive”) entered into an agreement dated February 16, 2007, and as amended (“Agreement”), to provide certain specified severance compensation and benefits (“Severance”) in the event of Executive’s termination. Company will terminate the employment of Executive effective March 29, 2011. Executive’s Separation from Service, as that term is defined in the Agreement, is February 4, 2011. Therefore, Executive is eligible for Severance, as long as certain conditions in the Agreement are met, including Executive’s execution of the release of claims as follows:

Executive hereby releases and forever discharges the Company, its subsidiaries, affiliates, officers, directors, agents and employees, from any and all claims, liabilities and obligations, of every kind and nature, whether now known or unknown, suspected or unsuspected, which Executive ever had, or now has, with the exception of claims that cannot be legally waived. This release includes all federal and state statutory claims, federal and state common law claims (including those for contract and tort), and claims under any federal or state anti-discrimination statute or ordinance, including but not limited to, Title VII of the Civil Rights Act of 1964 (as amended), the Age Discrimination in Employment Act, 42 U.S.C. sections 1981 and 1983, the Employee Retirement Income Security Act of 1974, the Americans with Disabilities Act, the California Constitution, the California Fair Employment and Housing Act, the California Unfair Competition Act (California Business and Professions Code section 17200 et seq.), the California Unruh Act, and the California Labor Code. Executive expressly waives the protection of Section 1542 of the Civil Code of the State of California, which states:

“A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affected the settlement with the debtor.”

This is a legally binding release. Executive is advised to consult with an attorney prior to signing this Release. Executive has more than 21 days to consider this Release. Executive must return this signed Release to the Company by March 18, 2011. Within seven days of signing this Release, Executive may revoke this Release by notifying the Company in writing that Executive revokes it. Executive is also advised to seek her own financial and tax consultants related to the Severance described in the Agreement.

Agreed to this 1 ^st day of February, 2011

/s/ Marka Hansen

Marka Hansen

Exhibit 10.2

January 31, 2011

Art Peck

Dear Art,

Congratulations on your new position with the company!

This letter is to confirm your compensation arrangements as President, Gap North America Division. In this position you will report to Glenn Murphy, Chairman and CEO, Gap Inc.

Salary. Your annual salary will be $850,000, payable every two weeks.

Start Date . Your first day in your new position will be February 2, 2011.

Annual Bonus . Based on your position as Division President, you will be eligible for an annual bonus based on achievement of Gap Inc. and/or Division financial objectives as well as key business goal and individual performance. Under the current program, your annual target bonus will be 75% of your base salary. Depending on results, your actual bonus, if any, may be higher or lower and can reach a maximum of 150%. Bonus payments will be prorated based on active time in position, divisional or country assignment and changes in base salary or incentive target that may occur during the fiscal year. Your annual bonus for fiscal 2011 is scheduled for payment in March 2012. You must be employed by Gap Inc. on the payment date to receive an award. Gap Inc. has the right to modify the program at any time. Management discretion can be used to modify the final award amount. Bonus payments are subject to supplemental income tax withholding.

Long-Term Incentive Awards . You will continue to participate in the Long-Term Growth Program and may be eligible for future Long-Term Incentive Awards as a participant in the Focal Review process.

Termination/Severance. The provisions in the Amendment to Agreement you signed on December 15, 2008 regarding certain compensation and benefits upon termination continue to apply.

Art Peck

January 31, 2011

Page Two

Abide by Gap Inc. Policies/Protection of Gap Inc. Information. You agree to abide by all Gap Inc. policies including, but not limited to, policies contained in the Code of Business Conduct. You also agree to abide by the Confidentiality and Non-Solicitation terms below during and after your employment with Gap Inc.

Insider Trading Policies. Based on the level of your position, you will be subject to Gap Inc.’s Securities Law Compliance Manual, which among other things places restrictions on your ability to buy and sell Gap Inc. stock and requires you to pre-clear trades, and comply with Section 16 of the Securities Exchange Act of 1934, as amended. If you do not already have a copy of the compliance manual, or have questions about it, you should contact Gap Inc. Stock Administration, at (415) 427-2481.

Confidentiality. You acknowledge that you will be in a relationship of confidence and trust with Gap Inc. As a result, during your employment with Gap Inc., you will acquire “Confidential Information,” which is information (whether in electronic or any other format) that people outside Gap Inc. never see, such as unannounced product information or designs, business or strategic plans, financial information and organizational charts, and other materials.

You agree that you will keep the Confidential Information in strictest confidence and trust. You will not, without the prior written consent of Gap Inc.’s General Counsel, directly or indirectly use or disclose to any person or entity any Confidential Information, during or after your employment, except as is necessary in the ordinary course of performing your duties while employed by Gap Inc., or if required to be disclosed by order of a court of competent jurisdiction, administrative agency or governmental body, or by subpoena, summons or other legal process, provided that prior to such disclosure, Gap Inc. is given reasonable advance notice of such order and an opportunity to object to such disclosure.

You agree that in the event your employment terminates for any reason, you will immediately deliver to Gap Inc. all company property, including all documents, materials or property of any description, or any reproduction of such materials, containing or pertaining to any Confidential Information.

Non-Solicitation of Employees. In order to protect Confidential Information, you agree that so long as you are employed by Gap Inc., and for a period of one year thereafter, you will not directly or indirectly, on behalf of yourself, any other person or entity, solicit, call upon, recruit, or attempt to solicit any of Gap Inc.’s employees or in any way encourage any Gap Inc. employee to leave their employment with Gap Inc. You further agree that you will not directly or indirectly, on behalf of yourself, any other person or entity, interfere or attempt to interfere with Gap Inc.’s relationship with any person who at any time was an employee, consultant, customer or vendor or otherwise has or had a business relationship with Gap Inc.

Non-disparagement. You agree now, and after your employment with the Gap Inc. terminates not to, directly or indirectly, disparage Gap Inc. in any way or to make negative,

Art Peck

January 31, 2011

Page Three

derogatory or untrue statements about Gap Inc., its business activities, or any of its directors, managers, officers, employees, affiliates, agents or representatives to any person or entity.

Employment Status. You understand that your employment is still “at-will”. This means that you do not have a contract of employment for any particular duration or limiting the grounds for your termination in any way. You are free to resign at any time. Similarly, Gap Inc. is free to terminate your employment at any time for any reason. The only way your at-will status can be changed is if you enter into an express written contract with Gap Inc. that contains the words “this is an express contract of employment” and is signed by an officer of Gap Inc.

In the event that there is any dispute over the terms, enforcement or obligations in this letter, the prevailing party shall be entitled to recover from the other party reasonable attorney fees and costs incurred to enforce any agreements.

Please note that except for those agreements or plans referenced in this letter, this letter contains the entire understanding of the parties and supersedes any other agreements, representations or understandings (whether oral or written and whether express or implied) with respect to this offer. Please review and sign this letter and return it to Eva Sage-Gavin at Gap Inc. You may keep one original for your personal records.

Art, congratulations on this latest achievement in your career at Gap Inc.

Yours sincerely,

/s/ Glenn Murphy

Glenn Murphy

Chairman and CEO, Gap Inc.

Confirmed this 29 ^th day of January, 2011

/s/ Art Peck

Art Peck

Exhibit 10.4

EXECUTION COPY

LETTER AMENDMENT No. 1

Dated as of April 25, 2011

To the banks, financial institutions

and other institutional lenders

(collectively, the “ Lenders ”) parties

to the Credit Agreement referred to

below and to Bank of America, N.A.,

as Agent for the Lenders

Ladies and Gentlemen:

We refer to the Term Loan and Revolving Credit Agreement dated as of April 7, 2011 (the “ Credit Agreement ”) among the undersigned, the LC Subsidiaries and Subsidiary Borrowers named therein, the Issuing Banks and Swing Line Lenders named therein and you. Capitalized terms not otherwise defined in this Letter Amendment have the same meanings as specified in the Credit Agreement.

You and we have agreed, upon the following terms and conditions, to amend the Credit Agreement in certain respects. Accordingly, it is hereby agreed by you and us as follows:

Section 1. Amendments to Credit Agreement . Subject to the satisfaction of the conditions precedent set forth in Section 3, effective as of the date of this Letter Amendment:

(a) The definition of “Term Facility” in Section 1.01 of the Credit Agreement is, hereby amended by deleting the date “April 29, 2011” and substituting therefor the date “May 19, 2011.”

(b) The definition of “Term Lender” in Section 1.01 of the Credit Agreement is, hereby amended by deleting the date “April 29, 2011” and substituting therefor the date “May 19, 2011” in both places such date appears.

(c) Section 2.01(b) of the Credit Agreement is, hereby amended by deleting the date “April 29, 2011” and substituting therefor the date “May 19, 2011.”

Section 2. Representation . The Company represents and warrants that the representations and warranties contained in Section 6.01 of the Credit Agreement are correct on and as of the date hereof, except to the extent that any such representation or warranty is stated to relate to an earlier date, in which case such representation or warranty shall be true and correct on and as of such earlier date, before and after giving effect to this Amendment, and no Default has occurred and is continuing.

Section 3. Effectiveness, Etc . This Letter Amendment shall become effective as of the date first above written when, and only when, the Agent shall have received counterparts of this Letter Amendment executed by the undersigned and all the Lenders. This Letter Amendment is subject to the provisions of Section 10.01 of the Credit Agreement.

On and after the effectiveness of this Letter Amendment, each reference in the Credit Agreement to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Credit Agreement, and each reference in the Notes and each of the other Loan Documents to “the Credit Agreement”, “thereunder”, “thereof” or words of like import referring to the Credit Agreement, shall mean and be a reference to the Credit Agreement, as amended by this Letter Amendment.

The Credit Agreement, the Notes and each of the other Loan Documents, as specifically amended by this Letter Amendment, are and shall continue to be in full force and effect and are hereby in all respects ratified and confirmed. The execution, delivery and effectiveness of this Letter Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or remedy of any Lender or any Agent under any of the Loan Documents, nor constitute a waiver of any provision of any of the Loan Documents.

If you agree to the terms and provisions hereof, please evidence such agreement by executing and returning at least two signature page of this Letter Amendment to Susan L. Hobart, Shearman & Sterling LLP, 599 Lexington Avenue, New York, New York 10022.

This Letter Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. Delivery of an executed counterpart of a signature page to this Letter Amendment by telecopier or other electronic medium shall be effective as delivery of an original executed counterpart of this Letter Amendment.


Gap Letter Amendment No. 1		2

This Letter Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.


Very truly yours,

	THE GAP, INC.

	By:	/s/ Jennifer Cho
	Name:	Jennifer Cho
	Title:	Vice President and Treasurer

Agreed as of the date first above written:


BANK OF AMERICA, N.A., as Agent and as a Lender

By:		/s/ Sabrina Hassan
Name:		Sabrina Hassan
Title:		Assistant Vice-President

JPMORGAN CHASE BANK, N.A.

By:		/s/ Barry K. Bergman
Name:		Barry K. Bergman
Title:		Managing Director

CITIBANK, N.A.

By:		/s/ Shannon Sweeney
Name:		Shannon Sweeney
Title:		Vice President

HSBC BANK USA, NATIONAL ASSOCIATION

By:		/s/ Thomas A. Foley
Name:		Thomas A. Foley
Title:		Managing Director

WELLS FARGO BANK, NATIONAL ASSOCIATION

By:		/s/ Sid Khanolkar
Name:		Sid Khanolkar
Title:		Vice President


Gap Letter Amendment No. 1


THE BANK OF NOVA SCOTIA

By:		/s/ John Mathews
Name:		John Mathews
Title:		Director – Corporate Banking

DEUTSCHE BANK AG NEW YORK BRANCH

By:		/s/ Ross Levitsky
Name:		Ross Levitsky
Title:		Managing Director

By:		/s/ Philippe Sandmeier
Name:		Philippe Sandmeier
Title:		Managing Director

GOLDMAN SACHS BANK USA

By:		/s/ Lauren Day
Name:		Lauren Day
Title:		Authorized Signatory

U.S. BANK NATIONAL ASSOCIATION

By:		/s/ Conan Schleicher
Name:		Conan Schleicher
Title:		Vice President

SUMITOMO MITSUI BANKING CORPORATION

By:		/s/ William M. Ginn
Name:		William M. Ginn
Title:		Executive Officer

BANK OF THE WEST

By:		/s/ William A. Pope
Name:		William A. Pope
Title:		Vice President


Gap Letter Amendment No. 1


FIFTH THIRD BANK

By:		/s/ Gary S. Losey
Name:		Gary S. Losey
Title:		Vice President – Corporate Banking

ROYAL BANK OF CANADA

By:		/s/ Jennifer Lee-You
Name:		Jennifer Lee-You
Title:		Attorney In Fact

ROYAL BANK OF CANADA (NEW YORK)

By:		/s/ Dustin Craven
Name:		Dustin Craven
Title:		Attorney-In-Fact

ROYAL BANK OF CANADA (LONDON)

By:		/s/ Michael Atherton
Name:		Michael Atherton
Title:		Managing Director, Corporate Banking


Gap Letter Amendment No. 1

Exhibit 10.7

Award No.

THE GAP, INC.

RESTRICTED STOCK UNIT AWARD AGREEMENT

The Gap, Inc. (the “Company”) hereby grants to (the “Employee”), an award (the “Award”) of Restricted Stock Units (each Restricted Stock Unit shall be referred to as a “Stock Award”) which represent the right to receive shares of the Company’s common stock, $0.05 par value (the “Shares”) subject to the fulfillment of the vesting conditions and other conditions set forth in the attached Appendix A and Appendix B. This Award is granted pursuant to The Gap, Inc. 2011 Long-Term Incentive Plan (the “Plan”) and is subject to all of the terms and conditions contained in this Restricted Stock Unit Award Agreement (the “Agreement”), including the terms and conditions contained in the attached Appendix A, Appendix B and the Plan. The date of this Agreement is . Subject to the provisions of Appendix A, Appendix B and of the Plan, the principal features of this Award are as follows:


		Number of Stock Awards:

		Date of Grant:

		Date(s) Stock Awards
		Scheduled to Vest:

As provided in the Plan and in this Agreement, this Award may terminate before the scheduled vest date(s) of the Stock Awards. For example, if Employee’s Termination of Service occurs before the date this Award vests, this Award will terminate at the same time as such termination. Important additional information on vesting and forfeiture of the Stock Awards covered by this Award including those due to changes in employment is contained in paragraphs 3 through 6 of Appendix A.

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement, in duplicate, to be effective as of the date first above written.


						THE GAP, INC.

Dated:

I understand that this Option is 1) subject to all of the terms and conditions of this Agreement (including the attached Appendix A and Appendix B) and of the Plan, 2) not considered salary, nor is it a promise for future grants of Options, 3) not a term or condition of my employment with the Company (or one of its Affiliates), and 4) made at the sole discretion of the Company.

APPENDIX A

TERMS AND CONDITIONS OF STOCK AWARD

1. Grant of Stock Awards . The Company hereby grants to the Employee as a separate incentive and not in lieu of any salary or other compensation for his or her services, an Award with respect to the number of Stock Awards set forth on page 1 of this Agreement, subject to all the terms and conditions in this Agreement and the Plan. Employee understands and agrees that this Award does not guarantee any future Stock Award grants and that grants are made at the sole discretion of the Company.

2. Company’s Obligation to Pay . Unless and until a Stock Award has vested in accordance with the vesting schedule set forth on the first page of this Agreement, the Employee will have no right to payment of a Share with respect to the Stock Award. Prior to actual payment of any Shares pursuant to vested Stock Awards, each Stock Award represents an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. No Shares shall be issued until after the Stock Awards have vested in accordance with the terms hereof and shall be issued in accordance with the settlement terms hereof.

3. Vesting of Stock Awards and Issuance of Shares .

(a)

Subject to paragraphs 4, 5 and 6, the Stock Awards subject to this Agreement will vest as to the number of Stock Awards, and on the dates shown, on the first page of this Agreement (each a “Vesting Date”), but in each case, only if the Employee has been continuously employed by, or providing consulting services to, the Company or one of its Affiliates from the date of this Award until the applicable Vesting Date of the Stock Awards. If Employee has had a Termination of Service prior to such date(s), the Award shall terminate, as set forth in paragraph 6.

(b)

Subject to earlier issuance pursuant to paragraph 4 or 5, upon each Vesting Date, one Share shall be issued for each Stock Award that vests on such Vesting Date, subject to the terms and provisions of the Plan and this Agreement.

(c)

If the Committee, in its discretion, accelerates the vesting of the balance, or some lesser portion of the balance, of the Stock Award, the payment of such accelerated portion of the Stock Award nevertheless shall be made at the same time or times as if such Stock Award had vested in accordance with the vesting schedule set forth on the first page of this Agreement (whether or not the Employee remains employed by the Company or by one of its Affiliates as of such date(s)).

(d)

Notwithstanding the foregoing, if the Committee, in its discretion, accelerates the vesting of the balance, or some lesser portion of the balance, of the Stock Award in connection with Employee’s “separation from service” within the meaning of Section 409A) and if (i) Employee is subject to U.S. income tax, and (ii) Employee is a “specified employee” within the meaning of Section 409A at the time of such separation from service, then any such accelerated Stock Awards otherwise payable within the six (6) month period following Employee’s separation from service instead will be paid on the date that is six (6) months and one (1) day following the date of Employee’s separation from service, unless the Employee dies following his or her separation from service prior to such time, in which case, the Stock Awards will be paid to the Employee’s estate upon his or her death, subject to paragraph 7. Thereafter, such Stock Awards shall continue to be paid in accordance with the requirements of paragraph 3(c). For purposes of this Agreement, “Section 409A” means Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and any final Treasury Regulations and other Internal Revenue Service guidance thereunder, as each may be amended from time to time (“Section 409A”). This paragraph 3(d) shall only apply to the extent necessary to avoid taxation under Section 409A.

(e)

It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the Shares subject to the Stock Award granted under this Agreement will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.

(f)

No fractional Shares shall be issued under this Agreement.

4. Death . In the event of the Employee’s death, the remaining Stock Awards shall automatically and with no exercise of discretion by the Committee become fully vested, and shall be settled, on the date of death. Notwithstanding the previous sentence, if in the event that within one year of the date of this Agreement, Employee dies, this Stock Award shall immediately thereupon terminate.

5. Retirement .

(a) Except as would result in taxation under Section 409A, a portion of the remaining Stock Awards automatically and with no exercise of discretion by the Committee shall become fully vested, and shall be settled, and applicable taxes shall be withheld by the Company or its designated Affiliate in accordance with paragraph 7 on the later of the date that the Employee becomes eligible for Retirement (as defined below) or November 15 ^th of the year in which Employee becomes eligible for Retirement. The portion of the remaining Stock Awards that vests and is settled in accordance with the preceding sentence shall have an aggregate market value sufficient to pay any taxes required to be withheld by the Company (or an Affiliate) solely as a result of (a) the Employee’s becoming eligible to receive shares of common stock upon Retirement pursuant to paragraph 5(b), and (b) the vesting and settlement of such portion of the remaining Stock Awards.

(b) In the event of Employee’s Retirement (as defined below) that, in the case of U.S. taxpayers, qualifies as a “separation from service” within the meaning of Section 409A, the remaining Stock Awards automatically and with no exercise of discretion by the Committee shall become fully vested, and shall be settled, on the date of such Retirement. Notwithstanding any other provision of this paragraph 5, if in the event that within one year of the date of this Agreement, Employee has a Termination of Service due to Retirement, no portion of this Stock Award will vest and this Stock Award shall immediately thereupon terminate. If (i) Employee is subject to U.S. income tax, and (ii) Employee is a “specified employee” within the meaning of Section 409A at the time of such Retirement then the payment of such accelerated Stock Awards will not be made until the date six (6) months and one (1) day following the date of such Retirement, unless the Employee dies following such Retirement prior to such time, in which case, the Stock Awards will be paid to the Employee’s estate (or beneficiary) upon his or her death, subject to paragraph 7.

For purposes of this Agreement, “Retirement” shall mean Employee’s Termination of Service for any reason (other than due to Employee’s misconduct as determined by the Company in its sole discretion) after Employee has attained age 60 and completed at least five (5) years of continuous service as an Employee of the Company or an Affiliate.

6. Termination of Service. Notwithstanding any contrary provision of this Agreement, the balance of the Stock Awards that have not vested pursuant to paragraphs 3, 4 or 5 will be forfeited and cancelled automatically at the time of the Employee’s Termination of Service. For purposes of this Agreement, Termination of Service shall have the meaning set forth in the Plan and be determined by reference to Employee’s active service without reference to any other agreement, written or oral, including Employee’s contract of employment (if any). Thus, in the event of Employee’s Termination of Service (whether or not in breach of local labor laws), unless otherwise expressly provided for under this Agreement, Employee’s right to vest in the Stock Awards under the Plan, if any, will terminate effective on Employee’s Termination of Service and will not be extended by any notice period mandated under local law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law); the Committee shall have the exclusive discretion to determine when the Employee has incurred a Termination of Service.

7. Withholding Taxes . Regardless of any action the Company or Employee’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related items related to the Employee’s participation in the Plan and legally applicable to the Employee (“Tax-Related Items”), the Employee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Employee is and remains the Employee’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Employee further acknowledges that the Company and/or the Employer (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Stock Awards, including the grant or vesting of the Stock Awards, the subsequent sale of Shares acquired under the Plan and the receipt of dividends, if any; and (b) does not commit to and is under no obligation to structure the terms of the Stock Awards or any aspect of the Stock Awards to reduce or eliminate the Employee’s liability for Tax-Related Items, or achieve any particular tax result. Further, if Employee has become subject to tax in more than one jurisdiction between the date of grant and the date of any relevant taxable event, Employee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

No payment will be made to the Employee (or his or her estate) for the Stock Award unless and until satisfactory arrangements (as determined by the Committee) have been made by the Employee with respect to the payment of any Tax-Related Items obligations of the Company and/or the Employer with respect to the Stock Awards. In this regard, the Employee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(a) withholding from Employee’s wages or other cash compensation paid to Employee by the Company or the Employer; or

(b) withholding from proceeds of the sale of Shares acquired upon vesting of the Stock Awards, either through a voluntary sale or through a mandatory sale arranged by the Company (on Employee’s behalf pursuant to this authorization); or

(d) surrendering already-owned Shares having a Fair Market Value equal to the Tax-Related Items that have been held for such period of time to avoid adverse accounting consequences.

If the obligation for Tax-Related Items is satisfied by withholding Shares, for tax purposes, the Employee is deemed to have been issued the full number of Shares subject to the Stock Award, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the Employee’s participation in the Plan. The Employee shall pay to the Company or Employer any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of the Employee’s participation in the Plan that cannot be satisfied by one or more of the means previously described in this paragraph 7. The Employee acknowledges and agrees that the Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Employee fails to comply with his or her obligations in connection with the Tax-Related Items.

It is the Company’s current practice to withhold a portion of the Shares scheduled to be issued pursuant to vested Stock Awards that have an aggregate market value sufficient to pay the Tax-Related Items. The Company will only withhold whole Shares and therefore the Employee also authorizes deduction without notice from salary or other amounts payable to the Employee of cash in an amount sufficient to satisfy the Employer’s remaining tax withholding obligation. Notwithstanding the previous two sentences, the Employee, if the Company in its sole discretion so agrees, may elect to furnish to the Company written notice, no more than 30 days and no less than 5 days in advance of a scheduled Vesting Date (or other required withholding event), of his or her intent to satisfy the tax withholding requirement by remitting the full amount of the tax withholding to the Company on the scheduled Vesting Date (or other required withholding event). In the event that Employee provides such written notice and fails to satisfy the amounts required for the Tax-Related Items by the Vesting Date (or other required withholding event), the Company shall satisfy the tax withholding requirement pursuant to the first two sentences of this paragraph. However, the Company reserves the right to withhold for Tax-Related Items pursuant to any means set forth in this paragraph.

8. Vesting/ Foreign Taxes Due . If Employee is subject to tax in a country outside the U.S. (“Foreign Country”) and if pursuant to the tax rules in such Foreign Country, Employee will be subject to tax prior to the date that Employee is issued Shares pursuant to this Agreement, the Committee, in its discretion, may accelerate vesting and settlement of a portion of the Stock Awards to the extent necessary to pay the foreign taxes due (and any applicable U.S. income taxes due as a result of the acceleration of vesting and settlement) but only if such acceleration does not result in taxation under Section 409A (as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xi)).

9. Beneficiary Designation . Any distribution or delivery to be made to the Employee under this Agreement will, if the Employee is then deceased, be made to the Employee’s designated beneficiary to the extent such designation is valid under applicable law, or if no such beneficiary survives the Employee or no beneficiary is designated, the person or persons entitled to such distribution or delivery under the Employee’s will or, to the executor of his or her estate. In order to be effective, a beneficiary designation must be made by the Employee in a form and manner acceptable to the Company and permitted by the Company. Any transferee must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

10. Conditions to Issuance of Shares . The Shares deliverable to the Employee on the Vesting Date(s) may be either previously authorized but unissued Shares or issued Shares that have been reacquired by the Company. The Company shall not be required to issue any Shares hereunder so long as the Company reasonably anticipates that such issuance will violate Federal securities law, foreign securities law or other applicable law; provided however, that in such event the Company shall issue such Shares at the earliest possible date at which the Company reasonably anticipates that the issuance of the shares will not cause such violation. For purposes of the previous sentence, any issuance of Shares that would cause inclusion in gross income or the application of any penalty provision or other provision of the Internal Revenue Code or foreign tax law shall not be treated as a violation of applicable law.

11. Rights as Stockholder . Neither the Employee nor any person claiming under or through the Employee will have any of the rights or privileges of a stockholder of the Company in respect of any Stock Award unless and until Shares have been issued in accordance with paragraph 3, 4 or 5, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Employee. Except as provided in paragraph 12, after such issuance, recordation, and delivery, the Employee will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

12. Adjustments . The Award is subject to adjustment in accordance with Section 4.3 of the Plan.

13. Nature of Grant . In accepting the grant of Stock Awards, the Employee acknowledges that:

(a) the grant of the Stock Awards is voluntary and occasional and does not create any contractual or other right to receive future grants of Stock Awards, or benefits in lieu of Stock Awards, even if Stock Awards have been granted repeatedly in the past;

(b) all decisions with respect to future Stock Award grants, if any, will be at the sole discretion of the Company;

(c) the Employee’s participation in the Plan shall not create a right to further employment with the Employer and shall not interfere with the ability of the Employer to terminate his or her employment relationship at any time;

(d) the Employee is voluntarily participating in the Plan;

(e) the Stock Awards are extraordinary items that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of the Employee’s employment contract, if any;

(f) the Stock Awards and the Shares subject to the Stock Awards are not intended to replace any pension rights or compensation;

(g) the Stock Awards are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer;

(h) the Stock Awards grant and the Employee’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Affiliate;

(i) the future value of the Shares is unknown and cannot be predicted with certainty; further, neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar that may affect the value of the Stock Awards;

(j) in consideration of the grant of the Stock Awards, no claim or entitlement to compensation or damages shall arise from forfeiture of the Stock Awards resulting from Employee’s Termination of Service with the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and the Employee irrevocably releases the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, the Employee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and

(k) the Stock Awards and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over or transfer of liability.

14. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding the Employee’s participation in the Plan, or his or her acquisition or sale of the underlying Shares. The Employee is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding the Employee’s participation in the Plan before taking any action related to the Plan.

15. Data Privacy . The Employee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of the Employee’s personal data as described in this Agreement by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing the Employee’s participation in the Plan.

The Employee understands that the Company and its Affiliates may hold certain personal information about the Employee, including, but not limited to, the Employee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company or any Affiliate, details of all Stock Awards or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”).

The Employee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, the Employee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Employee’s country. The Employee understands that he or she may request a list with the names and addresses of any potential recipients of the Personal Data by contacting the Employee’s local human resources representative. The Employee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing the Employee’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a broker or other third party with whom the Employee may elect to deposit any Shares received upon vesting of the Stock Awards. The Employee understands that Personal Data will be held only as long as is necessary to implement, administer and manage the Employee’s participation in the Plan. The Employee understands that he or she may, at any time, view Personal Data, request additional information about the storage and processing of Personal Data, require any necessary amendments to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing the Employee’s local human resources representative. The Employee understands that refusal or withdrawal of consent may affect the Employee’s ability to participate in the Plan or to realize benefits from the Stock Awards. For more information on the consequences of the Employee’s refusal to consent or withdrawal of consent, the Employee understands that he or she may contact his or her local human resources representative.

16. Plan Governs . This Agreement is subject to all the terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Terms used in this Agreement that are not defined in this Agreement will have the meaning set forth in the Plan.

17. Committee Authority . The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any portion of the Stock Award has vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

or Employee may terminate Employee’s employment at any time and for any reason subject to applicable local law. Employee also understands and agrees that his or her “at-will” status (if applicable) can only be changed by an express written contract signed by an authorized officer of the Company and Employee if the Employee’s employer is the Company.

19. Non-Transferability of Award . Except as otherwise herein provided, the Stock Awards herein granted and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of such Stock Award, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, such Stock Award and the rights and privileges conferred hereby will immediately become null and void.

20. Binding Agreement . Subject to the limitation on the transferability of the Stock Award contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the Employee and the Company.

21. Addresses for Notices . Any notice to be given to the Company under the terms of this Agreement will be addressed to the Company, in care of its Legal Department, at The Gap, Inc., Two Folsom, San Francisco, California 94105, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Employee will be addressed to the Employee at the address set forth on the records of the Company. Any such notice will be deemed to have been duly given if and when enclosed in a properly sealed envelope, addressed as aforesaid, and deposited, postage prepaid, in a United States post office or generally recognized international courier such as DHL or Federal Express.

22. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

23. Agreement Severable . In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.

24. Modifications to the Agreement . This Agreement constitutes the entire understanding of the parties on the subjects covered. The Employee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written agreement executed by a duly authorized officer of the Company.

25. Amendment, Suspension or Termination of the Plan . By accepting this Award, the Employee expressly warrants that he or she has received a right to an equity based award under the Plan, and has received, read, and understood a description of the Plan. The Employee understands that the Plan is discretionary in nature and may be modified, suspended, or terminated by the Company at any time.

26. Notice of Governing Law and Venue . This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without regard to principles of conflict of laws. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California and no other courts, where this grant is made and/or to be performed.

27. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. The Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

28. Language . If the Employee has received this Agreement, including Appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.

29. Appendix B . Notwithstanding any provisions in this Agreement, the Stock Awards shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for Employee’s country. Moreover, if the Employee relocates to one of the countries included in Appendix B, the special terms and conditions for such country will apply to the Employee, to the extent Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. As stated above, Appendix B constitutes part of this Agreement.

30. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Employee’s participation in the Plan, on the Stock Awards and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Employee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

* * *

APPENDIX B

ADDITIONAL TERMS AND CONDITIONS OF THE GAP, INC.

RESTRICTED STOCK UNIT AWARD AGREEMENT

NON-U.S. EMPLOYEES

Terms and Conditions

This Appendix B includes special terms and conditions applicable to Employee if Employee resides in one of the countries listed below. These terms and conditions are in addition to or, if so indicated, in place of, the terms and conditions set forth in the Agreement. Unless otherwise provided below, capitalized terms used but not defined herein shall have the same meanings assigned to them in the Plan and the Agreement.

Notifications

This Appendix also includes country-specific information of which Employee should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of May 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Employee does not rely on the information noted herein as the only source of information relating to the consequences of Employee’s participation in the Plan because the information may be out of date at the time that Employee vests in Share Awards or sells Shares acquired under the Plan.

In addition, the information is general in nature and may not apply to Employee’s particular situation, and the Company is not in a position to assure Employee of any particular result. Accordingly, Employee is advised to seek appropriate professional advice as to how the relevant laws in his or her country may apply to his or her situation. Finally, please note that if Employee is a citizen or resident of a country other than the country in which he or she is currently working, or transfers employment after grant, the information contained in this Appendix may not be applicable to Employee.

CANADA

Settlement of Stock Awards. Notwithstanding any discretion or anything to the contrary in the Plan, the grant of the Stock Awards does not provide any right for Employee to receive a cash payment and the Stock Awards will be settled in Shares only.

The following provisions will apply to Employees who are residents of Quebec:

Language Consent. The parties acknowledge that it is their express wish that this Agreement, as well as all documents, notices and legal proceedings entered into, given or instituted pursuant hereto or relating directly or indirectly hereto, be drawn up in English.

Les parties reconnaissent avoir exigé la redaction en anglais de cette convention (“Agreement”), ainsi que de tous documents exécutés, avis donnés et procedures judiciaries intentées, directement ou indirectement, relativement à la présente convention.

Authorization to Release and Transfer Necessary Personal Information. This provision supplements paragraph 15 of Appendix A of the Agreement:

Employee hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Employee further authorizes the Company and its Affiliates and the Committee, which administers the Plan, to disclose and discuss the Plan with their advisors. Employee further authorizes the Company and any Affiliate to record such information and to keep such information in Employee’s employee file.

FRANCE

Taxation of Award. This Award is not intended to be French tax-qualified.

Language Consent. In accepting the grant of the Stock Awards and the Agreement which provides for the terms and conditions of the Stock Awards, Employee confirms that he or she has read and understood the documents relating to the Stock Awards (the Plan and the Agreement), which were provided in the English language. Employee accepts the terms of these documents accordingly.

Consentement Relatif à la Langue Utilisée. En acceptant cette attribution gratuite d’actions et ce contrat qui contient les termes et conditions de cette attribution gratuite d’actions, l’employé confirme ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan et le Contrat d’Attribution) qui lui ont été communiqués en langue anglaise. , L’employé en accepte les termes en connaissance de cause.

Exchange Control Information. Employee may hold Shares acquired under the Plan outside of France provided he or she declares all foreign accounts, whether open, current, or closed, in his or her income tax return. Furthermore, Employee must declare to the customs and excise authorities any cash or bearer securities he or she imports or exports without the use of a financial institution when the value of the cash or securities is equal to or exceeds €10,000 (for 2011).

HONG KONG

Securities Law Notice. The Stock Awards and Shares issued upon vesting (if any) do not constitute a public offering of securities under Hong Kong law and are available only to Employees of the Company and its Affiliates. The Agreement, including this Appendix B, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. Nor have the documents been reviewed by any regulatory authority in Hong Kong. The Award is intended only for the personal use of each eligible Employee of the Company or its Affiliates and may not be distributed to any other person. If Employee is in any doubt about any of the contents of the Agreement, including this Appendix B, or the Plan, Employee should obtain independent professional advice.

Vesting of Stock Awards and Sale of Shares. In the event the Employee’s Stock Awards vest and Shares are issued to the Employee within six months of the date of grant, the Employee agrees that he or she will not dispose of any of such Shares prior to the six-month anniversary of the date of grant.

INDIA

Tax Information. The amount subject to tax at vesting may be dependent upon a valuation of Shares from a Merchant Banker in India. The Company has no responsibility or obligation to obtain the most favorable valuation possible nor obtain valuations more frequently than required under Indian tax law.

Exchange Control Obligations. Employee understands that he or she must repatriate any proceeds from the sale of Shares acquired under the Plan and any dividends received in relation to the Shares to India and convert the proceeds into local currency within ninety (90) days of receipt. Employee will receive a foreign inward remittance certificate (“FIRC”) from the bank where he or she deposits the foreign currency. Employee should maintain the FIRC as evidence of the repatriation of fund in the event the Reserve Bank of India or the Employer requests proof of repatriation.

INDONESIA

Exchange Control Information. If Employee remits proceeds from the sale of Shares into Indonesia, the Indonesian Bank through which the transaction is made will submit a report on the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a description of the transaction must be included in the report. Although the bank through which the transaction is made is required to make the report, Employee must complete a “Transfer Report Form.” The Transfer Report Form should be provided to Employee by the bank through which the transaction is made.

KOREA

Exchange Control Information. Exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares to repatriate the proceeds to Korea within 18 months of the sale.

PEOPLE’S REPUBLIC OF CHINA

Mandatory Sale of Shares Upon Vesting. By accepting the Stock Awards, the Employee acknowledges and agrees that the immediate sale of the Shares issued upon the vesting of Stock Awards is required unless the Company, in its sole discretion, determines otherwise. Such Shares will be transferred to a brokerage firm designated by the Company (the “Brokerage Firm”). The Brokerage Firm, on the Employee’s behalf, may thereafter immediately sell the Shares at the prevailing market price pursuant to any process for the sale set forth by the Company, and deliver the proceeds less the Tax-Related Items and any broker fees, to the Company or its designee, which would then remit the net proceeds to the Employee through the Company’s or Affiliate’s special purpose bank account in China. As a result of the immediate sale of Shares as set forth in this Appendix B, no Shares would be delivered to the Employee, and the Employee would not have any resulting rights as a shareholder of the Company.

Special Administration in China . The Employee’s ability to be issued Shares at vesting shall be contingent upon the Company or its Affiliate obtaining approval from the State Administration of Foreign Exchange (“SAFE”) for Employee’s participation in the Plan (to the extent required as determined by the Company in its sole discretion) and the establishment of a SAFE-approved bank account. If at the time of vesting, SAFE approval has not been obtained, the Company may cancel this Stock Award with no liability, compensation or benefits in lieu of compensation due to Employee. Employee understands and agrees that he or she will be required to immediately repatriate the proceeds from the vesting/ immediate sale of Shares to China. Employee further understands that such repatriation of proceeds may need to be effected through a special foreign exchange account established by the Company or Affiliate and Employee hereby consents and agrees that the proceeds from the vesting/ immediate sale of Shares may be transferred to such special account prior to being delivered to Employee’s personal account. Furthermore, Employee understands that due to SAFE approval requirements, there may be delays in delivering the proceeds to Employee, Employee will bear any exchange rate risk during the period between vesting and when the proceeds are delivered to him or her, Employee may be required to open a U.S. dollar bank account to receive the proceeds and also Employee may be required to pay the Company or an Affiliate the taxes due at vesting prior to receiving the proceeds from vesting/ immediate sale of Shares.

Please note that these special administration procedures will not apply to non Chinese Nationals.

The provisions above pursuant to which Employee agrees to sell all Shares issued to him or her immediately when the Shares are issued to him or her upon vesting at the then current market price is intended to be a plan pursuant to Rule 10b5-1 of the U.S. Securities Exchange Act of 1934 to the extent Employee is subject to this Act. By signing the Agreement, Employee represents that he or she is not aware of any material non-public information about the Company at the time he or she is signing the Agreement.

SINGAPORE

Securities Law Notice . The grant of Stock Awards is made in reliance on section 273(1)(f) of the Securities and Futures Act (Cap. 289) (“SFA”) for which it is exempt from the prospectus and registration requirements under the SFA.

Director Notification Obligation. If Employee is a director, associate director or shadow director (i.e., a non-director who has sufficient control so that the directors act in accordance with the directions and instructions of this individual) of the Company’s local entity in Singapore, he or she is subject to notification requirements under the Singapore Companies Act. Some of these notification requirements will be triggered by Employee’s participation in the Plan. Specifically, Employee is required to notify the local Singapore company when he or she acquires or disposes an interest in the Company, including when Employee receives Shares upon vesting of this Award and when Employee sells these Shares. The notification must be in writing and must be made within two days of acquiring or disposing of any interest in the Company (or within two days of initially becoming a director, associate director or shadow director of the Company’s local entity in Singapore). If Employee is unclear as to whether he or she is a director, associate director or shadow director of the Company’s local entity in Singapore or the form of the notification, he or she should consult with his or her personal legal advisor.

UNITED KINGDOM

Tax and National Insurance Contributions Acknowledgment. The following provision supplements paragraph 7 of the Agreement:

Employee agrees that if Employee does not pay or the Employer or the Company does not withhold from Employee the full amount of Tax-Related Items that Employee owes in connection with the vesting of the Stock Award and/or the acquisition of Shares pursuant to the vesting of the Stock Award, or the release or assignment of the Stock Award for consideration, or the receipt of any other benefit in connection with the Award (the “ Taxable Event ”) within ninety (90) days after the Taxable Event, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, then the amount that should have been withheld shall constitute a loan owed by Employee to the Employer, effective ninety (90) days after the Taxable Event. Employee agrees that the loan will bear interest at the official rate of HM Revenue and Customs (“HMRC”) and will be immediately due and repayable by Employee, and the Company and/or the Employer may recover it at any time thereafter by withholding the funds from salary, bonus or any other funds due to Employee by the Employer, by withholding in Shares issued upon vesting of the Award or from the cash proceeds from the sale of such Shares or by demanding cash or a cheque from Employee. Employee also authorizes the Company to withhold the transfer of any Shares unless and until the loan is repaid in full.

Notwithstanding the foregoing, if Employee is an officer or executive director (as within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), the terms of the immediately foregoing provision will not apply. In the event that Employee is an officer or executive director and Tax-Related Items are not collected from or paid by Employee within ninety (90) days of the Taxable Event, the amount of any uncollected Tax-Related Items may constitute a benefit to Employee on which additional income tax and National Insurance contributions may be payable. Employee will be responsible for reporting any income tax and National Insurance contributions due on this additional benefit directly to HMRC under the self-assessment regime.

* * *

Exhibit 10.8

Grant No.

THE GAP, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

The Gap, Inc. (the “Company”) hereby grants to (the “Employee”), a stock option (“Option”) under The Gap, Inc. 2011 Long-Term Incentive Plan (the “Plan”), to purchase shares of common stock of the Company, $0.05 par value (“Shares”). This Option is subject to all of the terms and conditions contained in this Non-Qualified Stock Option Agreement, including the terms and conditions contained in the attached Appendix A and Appendix B (collectively, the “Agreement”). The date of this Agreement is . Subject to the provisions of Appendix A and Appendix B of the Plan, the principal features of this Option are as follows:


Number of Shares Purchasable with this Option:

Price per Share:

Date of Grant:

Date(s) Stock Option is Scheduled to become Exercisable:



Vesting Date	Number of Shares Vesting on Vesting Date	Latest Date Option Expires

As provided in the Plan and in this Agreement, this Option may terminate before the date written above, including before the Option becomes exercisable or is exercised. For example, if Employee has a Termination of Service before the date this Option becomes exercisable, this Option will terminate at the same time as such termination. See paragraphs 5 and 6 of Appendix A for further information concerning how changes in employment affect termination of this Option. PLEASE BE SURE TO READ ALL OF APPENDIX A, APPENDIX B AND THE PLAN, WHICH CONTAIN THE SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

IN WITNESS WHEREOF, the Company and the Employee have agreed to the terms of this Agreement, to be effective as of the date first above written.


		THE GAP, INC.

Dated:

APPENDIX A

TERMS AND CONDITIONS OF NON-QUALIFIED STOCK OPTION

1. Grant of Option . The Company hereby grants to Employee under the Plan, as a separate incentive in connection with his or her employment and not in lieu of any salary or other compensation for his or her services, a non-qualified stock Option to purchase, on the terms and conditions set forth in this Agreement and the Plan, all or any part of the number of Shares set forth on page 1 of this Agreement. The Option granted hereby is not intended to be an Incentive Stock Option within the meaning of Section 422 of the Code.

2. Exercise Price . The purchase price per Share (the “Exercise Price”) shall be equal to the price set forth on page 1 of this Agreement. The Exercise Price shall be payable in the legal tender of the United States.

3. Number of Shares . The Option is subject to adjustment in accordance with Section 4.3 of the Plan. Subject to any required action of the stockholders of the Company, if the Company shall be the surviving corporation in any merger or consolidation, the Option granted hereunder (to the extent that it is still outstanding) shall pertain to and apply to the securities to which a holder of the same number of Shares that are then subject to the Option would have been entitled. To the extent that the foregoing adjustments relate to stock or securities of the Company, such adjustments shall be made by the Compensation and Management Development Committee of the Company’s Board of Directors (the “Committee”), whose determination in that respect shall be final, binding and conclusive.

4. Commencement of Exercisability . Except as otherwise provided in this Agreement, the right to exercise the Option awarded by this Agreement shall accrue as set forth on page 1 of this Agreement, assuming that Employee is still employed with, or providing consulting services to, the Company or an Affiliate through such date(s). If Employee is not employed with, or providing consulting services to, the Company or an Affiliate on such date(s), the Option shall terminate, as set out in paragraph 6.

5. Postponement of Exercisability . Notwithstanding paragraph 4 or any other provision of this Agreement, prior to the date this Option is scheduled to become exercisable, the Committee, in its sole discretion, may determine that the right to exercise the Option awarded by this Agreement shall accrue on a date later than such date. The Committee shall exercise its power to postpone the commencement of exercisability only if the Committee, in its sole discretion, determines that Employee has taken a personal leave of absence (as determined from time to time by the Committee and in accordance with applicable law) since the date of this Agreement and such postponement is in compliance with applicable local laws. The duration of the period of postponement shall equal the duration of the personal leave of absence (or shorter period if necessary to comply with applicable local laws). If Employee does not return from the personal leave of absence, the Option shall terminate as set out in paragraph 6 as of the date the Employee is scheduled to return from personal leave of absence.

6. Termination of Option . In the event that Employee has a Termination of Service for any reason other than Retirement (as defined below) or death, this Option shall immediately thereupon terminate, except that Employee shall have three (3) months from such termination to exercise any unexercised portion of the Option which is then exercisable (or, if earlier, until the date that is ten (10) years from the date of this Agreement). In the event of Employee’s Retirement, Employee may, within one (1) year after the date of such Retirement, or within ten (10) years from the date of this Agreement, whichever shall first occur, exercise any unexercised portion of the Option (whether or not exercisable). In the event that Employee shall die while in the employ of the Company or an Affiliate, any unexercised portion of the Option (whether or not exercisable) may be exercised by Employee’s beneficiary or transferee, as hereinafter provided, for a period of one (1) year after the date of Employee’s death or within ten (10) years from the date of this Agreement, whichever shall first occur. Notwithstanding the preceding two sentences, in the event that within one year of the date of this Agreement, Employee dies or has a Termination of Service due to Retirement, this Option shall immediately thereupon terminate. For purposes of this Agreement, “Retirement” shall mean Employee’s Termination of Service for any reason (other than due to Employee’s misconduct as determined by the Company in its sole discretion) after Employee has attained age 60 and completed at least five (5) years of continuous service as an Employee of the Company or an Affiliate.

For purposes of this Agreement, Termination of Service shall have the meaning set forth in the Plan and be determined by reference to Employee’s active service without reference to any other agreement, written or oral, including Employee’s contract of employment (if any). Thus, in the event of Employee’s Termination of Service (whether or not in breach of local labor laws), unless otherwise expressly provided for under this Agreement, Employee’s right to vest in and exercise the Option, if any, will terminate effective on Employee’s Termination of Service and will not be extended by any notice period mandated under local law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law); the

Committee shall have the exclusive discretion to determine when the Employee has incurred a Termination of Service.

7. Persons Eligible to Exercise . The Option shall be exercisable during Employee’s lifetime only by Employee. The Option shall be non-transferable by Employee other than by a beneficiary designation made in a form and manner acceptable to the Committee (and provided the Committee allows for beneficiary designations), or by will or the applicable laws of descent and distribution.

8. Death of Employee . To the extent exercisable after Employee’s death, the Option shall be exercised only by Employee’s designated beneficiary or beneficiaries, or if no beneficiary survives Employee or no beneficiary is designated, by the person or persons entitled to the Option under Employee’s will or in accordance with applicable local law, or if Employee shall fail to make testamentary disposition of the Option, his or her legal representative. Any transferee exercising the Option must furnish the Company (a) written notice of his or her status as transferee, (b) evidence satisfactory to the Company to establish the validity of the transfer of the Option and compliance with any laws or regulations pertaining to said transfer, and (c) written acceptance of the terms and conditions of the Option as prescribed in this Agreement.

9. Exercise of Option . The Option may be exercised by the person then entitled to do so as to any Shares which may then be purchased (a) by giving written notice of exercise to the Company, specifying the number of full Shares to be purchased and accompanied by full payment of the purchase price thereof (and the amount of any income tax, social insurance, payroll tax, or other tax-related items related to Employee’s participation in the Plan and legally payable by the Employee (“Tax-Related Items”)), and (b) by giving satisfactory assurances in writing if requested by the Company, signed by the person exercising the Option, that the Shares to be purchased upon such exercise are being purchased for investment and not with a view to the distribution thereof. The Company reserves the right to restrict the methods of payment of the Exercise Price if necessary to comply with local law, as determined by the Company in its sole discretion.

10. Tax Withholding and Payment Obligations . Regardless of any action the Company or Employee’s employer (the “Employer”) takes with respect to any or all Tax-Related Items, Employee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by Employee is and remains Employee’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Employee further acknowledges that the Company and/or the Employer (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Option, including the grant, vesting, or exercise of the Option, the subsequent sale of Shares acquired under the Plan and the receipt of dividends, if any; and (b) does not commit to and is under no obligation to structure the terms of the Option or any aspect of the Option to reduce or eliminate Employee’s liability for Tax-Related Items, or achieve any particular tax result. Further, if Employee has become subject to tax in more than one jurisdiction between the date of grant and the date of any relevant taxable event, Employee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

No payment will be made to Employee (or his or her estate or beneficiary) for an Option unless and until satisfactory arrangements (as determined by the Company) have been made by Employee with respect to the payment of any Tax-Related Items obligations of the Company and/or the Employer with respect to the Option. In this regard, Employee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(a) withholding from Employee’s wages or other cash compensation paid to Employee by the Company or the Employer; or

(b) withholding from proceeds of the sale of Shares acquired upon exercise of the Option, either through a voluntary sale or through a mandatory sale arranged by the Company (on Employee’s behalf pursuant to this authorization); or

(d) surrendering already-owned Shares having a Fair Market Value equal to the Tax-Related Items that have been held for such period of time to avoid adverse accounting consequences.

If the obligation for Tax-Related Items is satisfied by withholding Shares, for tax purposes, the Employee is deemed to have been issued the full number of Shares purchased, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the Employee’s participation in the Plan. Employee shall pay to the Company or Employer any amount of Tax-Related Items that the Company

may be required to withhold as a result of Employee’s participation in the Plan that cannot be satisfied by one or more of the means previously described in this paragraph 10. Employee acknowledges and agrees that the Company may refuse to honor the exercise and refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Employee fails to comply with his or her obligations in connection with the Tax-Related Items.

11. Nature of Grant . In accepting the Option, Employee acknowledges that:

(a) the Plan is established voluntarily by the Company, it is discretionary in nature and it may be modified, amended, suspended or terminated by the Company at any time;

(b) the grant of the Option is voluntary and occasional and does not create any contractual or other right to receive future grants of Options, or benefits in lieu of Options even if Options have been granted repeatedly in the past;

(d) Employee’s participation in the Plan is voluntary;

(e) the Option and the Shares subject to the Option are extraordinary items that do not constitute regular compensation for services rendered to the Company or the Employer, and that are outside the scope of Employee’s employment contract, if any;

(f) the Option and the Shares subject to the Option are not intended to replace any pension rights or compensation;

(g) the Option and the Shares subject to the Option are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, or end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer;

(h) the future value of the underlying Shares is unknown and cannot be predicted with certainty; further, if Employee exercises the Option and obtains Shares, the value of the Shares acquired upon exercise may increase or decrease in value, even below the Exercise Price;

(i) Employee also understands that neither the Company, nor any Affiliate is responsible for any foreign exchange fluctuation between local currency and the United States Dollar that may affect the value of the Option;

(j) in consideration of the grant of the Option, no claim or entitlement to compensation or damages shall arise from forfeiture of the Option resulting from termination of employment by the Employer (for any reason whatsoever and whether or not in breach of local labor laws), and Employee irrevocably releases the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, Employee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and

(k) the Option and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over or transfer of liability.

12. No Advice Regarding Grant . The Company is not providing any tax, legal or financial advice, nor is the Company making any recommendations regarding Employee’s participation in the Plan, or Employee’s acquisition or sale of the underlying Shares. Employee is hereby advised to consult with his or her own personal tax, legal and financial advisors regarding Employee’s participation in the Plan before taking any action related to the Plan.

13. Data Privacy . Employee hereby explicitly and unambiguously consents to the collection, use and transfer, in electronic or other form, of Employee’s personal data as described in this Agreement by and among, as applicable, the Company and its Affiliates for the exclusive purpose of implementing, administering and managing Employee’s participation in the Plan.

Employee understands that the Company and its Affiliates may hold certain personal information about Employee, including, but not limited to, Employee’s name, home address and

telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any shares of stock or directorships held in the Company or any Affiliate, details of all Options or any other entitlement to shares of stock awarded, canceled, exercised, vested, unvested or outstanding in Employee’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”). Employee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, Employee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than Employee’s country. Employee understands that he or she may request a list with the names and addresses of any potential recipients of the Personal Data by contacting Employee’s local human resources representative. Employee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing Employee’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a broker or other third party with whom Employee may elect to deposit any Shares received upon exercise of the Option. Employee understands that Personal Data will be held only as long as is necessary to implement, administer and manage Employee’s participation in the Plan. Employee understands that he or she may, at any time, view Personal Data, request additional information about the storage and processing of Personal Data, require any necessary amendments to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing Employee’s local human resources representative. Employee understands that refusal or withdrawal of consent may affect Employee’s ability to participate in the Plan or to realize benefits from the Option. For more information on the consequences of Employee’s refusal to consent or withdrawal of consent, Employee understands that he or she may contact his or her local human resources representative.

14. No Rights of Stockholder . Neither Employee nor any person claiming under or through said Employee shall be or have any of the rights or privileges of a stockholder of the Company in respect of any of the Shares issuable upon the exercise of the Option, unless and until certificates representing such Shares shall have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to Employee.

15. No Right to Continued Employment . Employee understands and agrees that this Agreement does not impact in any way the right of the Employer to terminate or change the terms of the employment of Employee at any time for any reason whatsoever, with or without good cause provided in accordance with applicable local law. Employee understands and agrees that unless contrary to applicable local law or there is an employment contract in place providing otherwise, his or her employment is “at-will” and that either the Employer or Employee may terminate Employee’s employment at any time and for any reason subject to applicable local law. Employee also understands and agrees that his or her “at-will” status (if applicable) can only be changed by an express written contract signed by an authorized officer of the Company and Employee if the Employee’s employer is the Company.

16. Addresses for Notices . Any notice to be given to the Company under the terms of this Agreement shall be addressed to the Company, in care of its Legal Department, at The Gap, Inc., 2 Folsom, 13 ^th Floor, San Francisco, California 94105, or at such other address as the Company may hereafter designate in writing. Any notice to be given to Employee shall be addressed to Employee at the address set forth beneath Employee’s signature hereto, or at such other address as Employee may hereafter designate in writing. Any such notice shall be deemed to have been duly given if and when enclosed in a properly sealed envelope, addressed as aforesaid, registered or certified and deposited, postage and registry fee prepaid, in a United States post office or generally recognized international courier such as DHL or Federal Express.

17. Non-Transferability of Option . Except as otherwise herein provided, the Option herein granted and the rights and privileges conferred hereby shall not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and shall not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of said Option, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, said Option and the rights and privileges conferred hereby shall immediately become null and void.

18. Maximum Term of Option . Notwithstanding any other provision of this Agreement, this Option is not exercisable after the expiration of ten (10) years from the date of this Agreement.

19. Binding Agreement . Subject to the limitation on the transferability of the Option contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the parties hereto.

20. Plan Governs . This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan shall govern. Terms used and not defined in this Agreement shall have the meaning set forth in the Plan.

21. Committee Authority . The Committee shall have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules. All actions taken and all interpretations and determinations made by the Committee in good faith shall be final and binding upon Employee, the Company and all other interested persons. No member of the Committee shall be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

22. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

23. Modifications to this Agreement . This Agreement constitutes the entire understanding of the parties on the subjects covered. Employee expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written contract executed by a duly authorized officer of the Company.

24. Agreement Severable . In the event that any provision in this Agreement shall be held invalid or unenforceable, such provision shall be severable from, and such invalidity or unenforceability shall not be construed to have any effect on, the remaining provisions of this Agreement.

25. Notice of Governing Law and Venue . This Agreement shall be governed by, and construed in accordance with, the laws of the State of California without regard to principles of conflict of laws. For purposes of litigating any dispute that arises directly or indirectly from the relationship of the parties evidenced by this grant or the Agreement, the parties hereby submit to and consent to the exclusive jurisdiction of the State of California and agree that such litigation shall be conducted only in the courts of San Francisco County, California, or the federal courts for the United States for the Northern District of California and no other courts, where this grant is made and/or to be performed.

26. Electronic Delivery . The Company may, in its sole discretion, decide to deliver any documents related to current or future participation in the Plan by electronic means. Employee hereby consents to receive such documents by electronic delivery and agrees to participate in the Plan through an on-line or electronic system established and maintained by the Company or another third party designated by the Company.

27. Language. If Employee has received this Agreement, including Appendices, or any other document related to the Plan translated into a language other than English, and the meaning of the translated version is different than the English version, the English version will control.

28. Appendix B . Notwithstanding any provisions in this Agreement, the Option grant shall be subject to any special terms and conditions set forth in Appendix B to this Agreement for Employee’s country. Moreover, if Employee relocates to one of the countries included in Appendix B, the special terms and conditions for such country will apply to Employee, to the extent the Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. As stated above, Appendix B constitutes part of this Agreement.

29. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Employee’s participation in the Plan, on the Option and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require Employee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

* * *

APPENDIX B

ADDITIONAL TERMS AND CONDITIONS OF THE GAP, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

NON-U.S. EMPLOYEES

Terms and Conditions

Notifications

This Appendix also includes country-specific information of which Employee should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of May 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Employee does not rely on the information noted herein as the only source of information relating to the consequences of Employee’s participation in the Plan because the information may be out of date at the time that Employee exercises the Option or sell Shares acquired under the Plan.

CANADA

Form of Payment . Notwithstanding anything to the contrary in the Plan or the Agreement, the Employee is prohibited from surrendering Shares that he or she already owns or attesting to the ownership of Shares to pay the Exercise Price or any Tax-Related Items in connection with the Option.

The following provisions will apply to Employees who are residents of Quebec:

Authorization to Release and Transfer Necessary Personal Information. This provision supplements paragraph 13 of Appendix A of the Agreement:

FRANCE

Taxation of Option. This Option is not intended to be French tax-qualified.

Language Consent. In accepting the grant of the Option and the Agreement which provides for the terms and conditions of the Option, Employee confirms that he or she has read and understood the documents relating to the Option (the Plan and the Agreement), which were provided in the English language. Employee accepts the terms of these documents accordingly.

Consentement Relatif à la Langue Utilisée. En acceptant cette attribution d’Options et ce contrat qui contient les termes et conditions de cette attribution d’Options, l’employé confirme ainsi avoir lu et compris les documents relatifs à cette attribution (le Plan et le Contrat d’Attribution) qui lui ont été communiqués en langue anglaise. , L’employé en accepte les termes en connaissance de cause.

HONG KONG

Securities Law Notice. The Option and Shares issued upon exercise of the Option do not constitute a public offering of securities under Hong Kong law and are available only to Employees of the Company and its Affiliates. The Agreement, including this Appendix B, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. Nor have the documents been reviewed by any regulatory authority in Hong Kong. The Option is intended only for the personal use of each eligible Employee of the Company or its Affiliates and may not be distributed to any other person. If Employee is in any doubt about any of the contents of the Agreement, including this Appendix, or the Plan, Employee should obtain independent professional advice.

Settlement of Option and Sale of Shares. In the event Employee’s Option vests and Shares are issued to Employee within six months of the date of grant, Employee agrees that he or she will not dispose of any of such Shares prior to the six-month anniversary of the date of grant.

INDIA

Form of Payment. Notwithstanding anything to the contrary in the Plan or the Agreement, due to legal restrictions in India, Employee will not be permitted to pay the Exercise Price by using a cashless sell-to-cover method of exercise (under which method a number of Shares with a value sufficient to cover the Exercise Price, brokerage fees and any applicable Tax-Related Items would be sold upon exercise and Employee would receive only the remaining Shares subject to the exercised Option). The Company reserves the right to allow additional forms of payment depending on the development of local law.

Tax Information. The amount subject to tax at exercise may be dependent upon a valuation of Shares from a Merchant Banker in India. The Company has no responsibility or obligation to obtain the most favorable valuation possible nor obtain valuations more frequently than required under Indian tax law.

INDONESIA

Form of Payment. Notwithstanding anything to the contrary in the Plan or the Agreement, due to local legal requirements, Employee will be required to pay the Exercise Price through the delivery of irrevocable instructions to a Company-designated broker to immediately sell all of the Shares acquired upon exercise of the Option and to deliver promptly to the Company an amount out of the proceeds of such sale equal to the

aggregate Exercise Price for the Shares being purchased (and any Tax-Related Items). The remaining proceeds of the sale of the Shares, less any Tax-Related Items and broker’s fees or commissions, will be remitted to Employee. The Company reserves the right to allow additional forms of payment depending on the development of local law.

Exchange Control Information. If Employee remits proceeds from the cashless exercise of the Option into Indonesia, the Indonesian Bank through which the transaction is made will submit a report on the transaction to the Bank of Indonesia for statistical reporting purposes. For transactions of US$10,000 or more, a description of the transaction must be included in the report. Although the bank through which the transaction is made is required to make the report, Employee must complete a “Transfer Report Form.” The Transfer Report Form should be provided to Employee by the bank through which the transaction is made.

KOREA

Exchange Control Information. If Employee remits funds out of Korea to pay the Exercise Price, his or her remittance must be “confirmed” by a foreign exchange bank in Korea. This is an automatic procedure, i.e. , the bank does not need to “approve” the remittance, and it should take no more than a single day to process. The following supporting documents evidencing the nature of the remittance must be submitted to the bank together with the confirmation application: (i) Agreement; (ii) the Plan; (iii) a document evidencing the type of Shares to be acquired and the amount; and (iv) Employee’s certificate of employment. This confirmation is not necessary for cashless exercises since there is no remittance out of Korea.

Additionally, exchange control laws require Korean residents who realize US$500,000 or more from the sale of Shares to repatriate the proceeds to Korea within 18 months of the sale.

PEOPLE’S REPUBLIC OF CHINA

Mandatory Cashless Exercise. By accepting the Option, the Employee acknowledges and agrees that the immediate sale of the Shares issued upon the exercise of the Option is required unless the Company, in its sole discretion, determines otherwise. Such Shares will be transferred to a brokerage firm designated by the Company (the “Brokerage Firm”). The Brokerage Firm, on the Employee’s behalf, may, upon the Employee’s delivery of a properly executed written notice of exercise together with irrevocable instructions to the Brokerage Firm, thereafter immediately sell the Shares at the prevailing market price pursuant to any process for the sale set forth by the Company, and deliver the proceeds, less the Exercise Price, Tax-Related Items and any broker fees, to the Company or its designee, which would then remit the net proceeds to the Employee through the Company’s or Affiliate’s special purpose bank account in China. As a result of the immediate sale of Shares as set forth in this Appendix B, no Shares would be delivered to the Employee, and the Employee would not have any resulting rights as a shareholder of the Company.

Special Administration in China . The Employee’s ability to exercise the Option shall be contingent upon the Company or its Affiliate obtaining approval from the State Administration of Foreign Exchange (“SAFE”) for Employee’s participation in the Plan (to the extent required as determined by the Company in its sole discretion) and the establishment of a SAFE-approved bank account. Employee understands and agrees that he or she will be required to immediately repatriate the proceeds from the exercise/ immediate sale of Shares to China. Employee further understands that such repatriation of proceeds may need to be effected through a special foreign exchange account established by the Company or Affiliate and Employee hereby consents and agrees that the proceeds from the exercise/ immediate sale of Shares may be transferred to such special account prior to being delivered to Employee’s personal account. Furthermore, Employee understands that due to SAFE approval requirements, there may be delays in delivering the proceeds to Employee, Employee will bear any exchange rate risk during the period between exercise and when the proceeds are delivered to him or her, Employee may be required to open up a U.S. dollar bank account to receive the proceeds and also Employee may be required to pay the Company or an Affiliate the taxes due on the exercise prior to receiving the proceeds from exercise/ immediate sale of Shares. Furthermore, the Company may shorten the post-termination exercise periods if required by SAFE.

Please note that these special administration procedures will not apply to non Chinese Nationals.

The provisions above pursuant to which Employee agrees to sell all Shares issued to him or her immediately when the Shares are issued to him or her upon exercise at the then current market price is intended to be a plan pursuant to Rule 10b5-1 of the U.S. Securities Exchange Act of 1934 to the extent Employee is subject to this Act. By signing the Agreement, Employee represents that he or she is not aware of any material non-public information about the Company at the time he or she is signing the Agreement.

SINGAPORE

Securities Law Notice . The grant of the Option is made in reliance on section 273(1)(f) of the Securities and Futures Act (Cap. 289) (“SFA”) for which it is exempt from the prospectus and registration requirements under the SFA.

Director Notification Obligation. If Employee is a director, associate director or shadow director (i.e., a non-director who has sufficient control so that the directors act in accordance with the directions and instructions of this individual) of the Company’s local entity in Singapore, he or she is subject to notification requirements under the Singapore Companies Act. Some of these notification requirements will be triggered by Employee’s participation in the Plan. Specifically, Employee is required to notify the local Singapore company when he or she acquires or disposes an interest in the Company, including when Employee is granted the Option, receives Shares upon exercise and when Employee sells these Shares. The notification must be in writing and must be made within two days of acquiring or disposing of any interest in the Company (or within two days of initially becoming a director, associate director or shadow director of the Company’s local entity in Singapore). If Employee is unclear as to whether he or she is a director, associate director or shadow director of the Company’s local entity in Singapore or the form of the notification, he or she should consult with his or her personal legal advisor.

UNITED KINGDOM

Tax and National Insurance Contributions Acknowledgment . The following provision supplements paragraph 10 of the Agreement:

Employee agrees that if Employee does not pay or the Employer or the Company does not withhold from Employee the full amount of Tax-Related Items that Employee owes in connection with the exercise of the Option and/or the acquisition of Shares pursuant to the exercise of the Option, or the release or assignment of the Option for consideration, or the receipt of any other benefit in connection with the Option (the “ Taxable Event ”) within ninety (90) days after the Taxable Event, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, then the amount that should have been withheld shall constitute a loan owed by Employee to the Employer, effective ninety (90) days after the Taxable Event. Employee agrees that the loan will bear interest at the official rate of HM Revenue and Customs (“HMRC”) and will be immediately due and repayable by Employee, and the Company and/or the Employer may recover it at any time thereafter by withholding the funds from salary, bonus or any other funds due to Employee by the Employer, by withholding in Shares issued at exercise of the Option or from the cash proceeds from the sale of such Shares or by demanding cash or a cheque from Employee. Employee also authorizes the Company to withhold the transfer of any Shares unless and until the loan is repaid in full.

* * *

Exhibit 10.9

Award No.

THE GAP, INC.

PERFORMANCE SHARE AGREEMENT

The Gap, Inc. (the “Company”) hereby grants to (the “Employee”), an award (the “Award”) of Performance Shares, which represent the right to receive shares of the Company’s common stock, $0.05 par value (the “Shares”) subject to the fulfillment of performance and vesting conditions and the other conditions set forth in the attached Appendix A and Appendix B. This Award is granted pursuant to The Gap, Inc. 2011 Long-Term Incentive Plan (the “Plan”) and is subject to all of the terms and conditions contained in this Performance Share Agreement including the terms and conditions contained in the attached Appendix A and Appendix B (collectively, the “Agreement”). The date of this Agreement is (“Date of Grant”). Subject to the provisions of Appendix A, Appendix B and of the Plan, the principal features of this Award are as follows:


		Number of Performance Shares at Threshold Performance:

		Number of Performance Shares at Target Performance:

		Maximum Number of Performance Shares:

		Date(s) Performance Shares		if Performance Goals are met
		Scheduled to Vest:

Performance Goals: The actual number of Shares to be earned under this Award will be determined based on (1) attainment of annual, or other period, division or corporate earnings goals over 3 years, and (2) achievement of Company cumulative earnings goals for the same 3 years. In both cases, the earnings goals and the extent to which they have been achieved will be determined by the Compensation and Management Development Committee (the “Committee”) of the Board of Directors, in its sole discretion. In addition, the number of Shares earned under this Award may be further reduced at the Committee’s discretion.

Date(s) Performance Shares Scheduled to Vest: To the extent that the Performance Goals described above are achieved and Shares are earned, as determined and certified by the Committee, then (1) 50% of the earned Shares shall be paid on the date in that the Committee certifies attainment (the “Certification Date”), and (2) the remaining 50% of the earned Shares shall vest on the one year anniversary of the Certification Date. Notwithstanding the foregoing, if the Employee is demoted to a lower Company salary grade before the end of fiscal year , Employee shall forfeit his or her Award.

As provided in the Plan and in this Agreement, this Award may terminate before the scheduled vest date(s) of the Performance Shares. For example, if Employee’s Termination of Service occurs before the date this Award vests, this Award will terminate at the same time as such termination. Important additional information on vesting and forfeiture of the Performance Shares covered by this Award including those due to changes in employment is contained in paragraphs 3 through 6 of Appendix A.

IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement, in duplicate, to be effective as of the date first above written.


		THE GAP, INC.

Dated:

My signature below indicates that I understand that this Award is 1) subject to all of the terms and conditions of this Agreement (including the attached Appendix A and Appendix B) and of the Plan, 2) not considered salary, nor

is it a promise for future grants of Performance Shares, 3) not a term or condition of my employment with the Company (or one of its Affiliates), and 4) made at the sole discretion of the Company.


		EMPLOYEE

Dated:		Signature:

		Address:

APPENDIX A

TERMS AND CONDITIONS OF PERFORMANCE SHARES

1. Grant of Performance Shares . The Company hereby grants to the Employee as a separate incentive that is not in lieu of any salary or other compensation for his or her services, an Award with respect to the number of Performance Shares set forth on page 1 of this Agreement, subject to all the terms and conditions in this Agreement and the Plan. Employee understands and agrees that this Award does not guarantee any future Performance Share grants and that grants are made at the sole discretion of the Company.

2. Company’s Obligation to Pay . Unless and until a Performance Share has vested in accordance with the vesting schedule set forth on the first page of this Agreement, the Employee will have no right to payment of a Share with respect to the Performance Share. Prior to actual payment of any Shares pursuant to vested Performance Shares, each Performance Share represents an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company. No Shares shall be issued until after the Performance Shares have vested in accordance with the terms hereof and shall be issued in accordance with the settlement terms hereof.

3. Vesting of Performance Shares and Issuance of Shares .

(a)

Subject to paragraphs 4, 5 and 6, the Performance Shares subject to this Agreement will vest (as to the number of Performance Shares determined based on the extent to which the Performance Goals have been achieved) on the dates shown on the first page of this Agreement (each a “Vesting Date”), but in each case, only if the Employee has been continuously employed by, or providing consulting services to, the Company or one of its Affiliates from the date of this Award until the applicable Vesting Date of the Performance Shares. If Employee has had a Termination of Service prior to such date(s), the Award shall terminate as set forth in paragraph 6.

(b)

Subject to earlier issuance pursuant to paragraph 4 or 5, upon each Vesting Date, one Share shall be issued for each Performance Share that vests on such Vesting Date, subject to the terms and provisions of the Plan and this Agreement.

(c)

If the Committee, in its discretion, accelerates the vesting of the balance, or some lesser portion of the balance, of the Performance Shares, the payment of such accelerated Performance Shares nevertheless shall be made at the same time or times as if such Performance Shares had vested in accordance with the vesting schedule set forth on the first page of this Agreement (whether or not the Employee remains employed by the Company or by one of its Affiliates as of such date(s)).

(d)

Notwithstanding the foregoing, if the Committee, in its discretion, accelerates the vesting of the balance, or some lesser portion of the balance, of the Performance Shares in connection with Employee’s “separation from service” within the meaning of Section 409A) and if (i) Employee is subject to U.S. income tax, and (ii) Employee is a “specified employee” within the meaning of Section 409A at the time of such separation from service, then any such accelerated Performance Shares otherwise payable within the six (6) month period following Employee’s separation from service instead will be paid on the date that is six (6) months and one (1) day following the date of Employee’s separation from service, unless the Employee dies following his or her separation from service prior to such time, in which case, the Performance Shares will be paid to the Employee’s estate (or beneficiary) upon his or her death, subject to paragraph 7. Thereafter, such Performance Shares shall continue to be paid in accordance with the requirements of paragraph 3(c). For purposes of this Agreement, “Section 409A” means Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and any final Treasury Regulations and other Internal Revenue Service guidance thereunder, as each may be amended from time to time (“Section 409A”). This paragraph 3(d) shall only apply to the extent necessary to avoid taxation under Section 409A.

(e)

It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the Performance Shares granted under this Agreement or the Shares issued in payment thereof will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply.

(f)

No fractional Shares shall be issued under this Agreement.

4. Death . In the event of the Employee’s death after the end of the applicable performance period, the remaining Performance Shares shall automatically and with no exercise of discretion by the Committee become fully vested, and shall be settled, on the date of death to the extent that the Performance Goals have been achieved as of the date of death.

5. Retirement .

(a) Except as would result in taxation under Section 409A, a portion of the remaining Performance Shares automatically and with no exercise of discretion by the Committee shall become fully vested, and shall be settled, and applicable taxes shall be withheld by the Company or its designated Affiliate in accordance with paragraph 7 at the following time: (i) if the Performance Goals have been achieved before the Employee becomes eligible for Retirement (as defined below), on the later of the date the Employee becomes eligible for Retirement or November 15 ^th of the year in which Employee becomes eligible for Retirement; or (ii) if Employee becomes eligible for Retirement before the Performance Goals are achieved, on the later of the date the Performance Goals are achieved or November 15 ^th of the year in which the Performance Goals are achieved. The portion of the remaining Performance Shares that vests and is settled in accordance with the preceding sentence shall have an aggregate market value sufficient to pay any taxes required to be withheld by the Company (or an Affiliate) solely as a result of (a) the Employee’s becoming eligible to receive shares of common stock upon Retirement pursuant to paragraph 5(b), and (b) the vesting and settlement of such portion of the remaining Performance Shares.

(b) In the event of Employee’s Retirement (as defined below) after the end of the applicable performance period that, in the case of U.S. taxpayers, qualifies as a “separation from service” within the meaning of Section 409A, the remaining Performance Shares automatically and with no exercise of discretion by the Committee shall become fully vested, and shall be settled, on the date of Retirement, to the extent that the Performance Goals have been achieved on or before the date of Retirement. If (i) Employee is subject to U.S. income tax, and (ii) Employee is a “specified employee” within the meaning of Section 409A at the time of Employee’s Retirement then the payment of such accelerated Performance Shares will not be made until the date six (6) months and one (1) day following the date of Employee’s Retirement, unless the Employee dies following such Retirement prior to such time, in which case, the Performance Shares will be paid to the Employee’s estate upon his or her death, subject to paragraph 7.

6. Termination of Service. Notwithstanding any contrary provision of this Agreement, the balance of Performance Shares that have not vested pursuant to paragraphs 3, 4 or 5 will be forfeited and cancelled automatically at the time of the Employee’s Termination of Service. For purposes of this Agreement, Termination of Service shall have the meaning set forth in the Plan and be determined by reference to Employee’s active service without reference to any other agreement, written or oral, including Employee’s contract of employment (if any). Thus, in the event of Employee’s Termination of Service (whether or not in breach of local labor laws), unless otherwise expressly provided for under this Agreement, Employee’s right to vest in the Performance Shares under the Plan, if any, will terminate effective on Employee’s Termination of Service and will not be extended by any notice period mandated under local law ( e.g. , active employment would not include a period of “garden leave” or similar period pursuant to local law); the Committee shall have the exclusive discretion to determine when the Employee has incurred a Termination of Service.

7. Withholding Taxes . Regardless of any action the Company or Employee’s employer (the “Employer”) takes with respect to any or all income tax, social insurance, payroll tax, or other tax-related items related to the Employee’s participation in the Plan and legally applicable to the Employee (“Tax-Related Items”), the Employee acknowledges and agrees that the ultimate liability for all Tax-Related Items legally due by the Employee is and remains the Employee’s responsibility and may exceed the amount actually withheld by the Company or the Employer. Employee further acknowledges that the Company and/or the Employer (a) makes no representations or undertakings regarding the treatment of any Tax-Related Items in connection with any aspect of the Performance Shares, including the grant or vesting of the Performance Shares, the subsequent sale of Shares acquired under the Plan and the receipt of dividends, if any; and (b) does not commit to and is under no obligation to structure the terms of the Performance Shares or any aspect of the Performance Shares to reduce or eliminate the Employee’s liability for Tax-Related Items, or achieve any particular tax result. Further, if Employee has become subject to tax in more than one jurisdiction between the date of grant and the date of any relevant taxable event, Employee acknowledges that the Company and/or the Employer (or former employer, as applicable) may be required to withhold or account for Tax-Related Items in more than one jurisdiction.

No payment will be made to the Employee (or his or her estate) for the Performance Shares unless and until satisfactory arrangements (as determined by the Committee) have been made by the Employee with respect to the payment of any Tax-Related Items obligations of the Company and/or the Employer with respect to the Performance Shares. In this regard, the Employee authorizes the Company and/or the Employer, or their respective agents, at their discretion, to satisfy the obligations with regard to all Tax-Related Items by one or a combination of the following:

(a) withholding from Employee’s wages or other cash compensation paid to Employee by the Company or the Employer; or

(b) withholding from proceeds of the sale of Shares acquired upon vesting of the Performance Shares, either through a voluntary sale or through a mandatory sale arranged by the Company (on Employee’s behalf pursuant to this authorization); or

(d) surrendering already-owned Shares having a Fair Market Value equal to the Tax-Related Items that have been held for such period of time to avoid adverse accounting consequences.

If the obligation for Tax-Related Items is satisfied by withholding Shares, for tax purposes, the Employee is deemed to have been issued the full number of Shares subject to the Performance Shares, notwithstanding that a number of the Shares is held back solely for the purpose of paying the Tax-Related Items due as a result of the Employee’s participation in the Plan. The Employee shall pay to the Company or Employer any amount of Tax-Related Items that the Company may be required to withhold or account for as a result of the Employee’s participation in the Plan that cannot be satisfied by one or more of the means previously described in this paragraph 7. The Employee acknowledges and agrees that the Company may refuse to issue or deliver the Shares or the proceeds of the sale of Shares if Employee fails to comply with his or her obligations in connection with the Tax-Related Items.

It is the Company’s current practice to withhold a portion of the Shares scheduled to be issued pursuant to vested Performance Shares that have an aggregate market value sufficient to pay the Tax-Related Items. The Company will only withhold whole Shares and therefore the Employee also authorizes deduction without notice from salary or other amounts payable to the Employee of cash in an amount sufficient to satisfy the Employer’s remaining tax withholding obligation. Notwithstanding the previous two sentences, the Employee, if the Company in its sole discretion so agrees, may elect to furnish to the Company written notice, no more than 30 days and no less than 5 days in advance of a scheduled Vesting Date (or other required withholding event), of his or her intent to satisfy the tax withholding requirement by remitting the full amount of the tax withholding to the Company on the scheduled Vesting Date (or other required withholding event). In the event that Employee provides such written notice and fails to satisfy the amounts required for the Tax-Related Items by the Vesting Date (or other required withholding event), the Company shall satisfy the tax withholding requirement pursuant to the first two sentences of this paragraph. However, the Company reserves the right to withhold for Tax-Related Items pursuant to any means set forth in this paragraph.

8. Vesting/ Foreign Taxes Due . If Employee is subject to tax in a country outside the U.S. (“Foreign Country”) and if pursuant to the tax rules in such Foreign Country, Employee will be subject to tax prior to the date that Employee is issued Shares pursuant to this Agreement, the Committee, in its discretion, may accelerate vesting and settlement of a portion of the Performance Shares to the extent necessary to pay the foreign taxes due (and any applicable U.S. income taxes due as a result of the acceleration of vesting and settlement) but only if such acceleration does not result in taxation under Section 409A (as permitted under Treasury Regulation Section 1.409A-3(j)(4)(xi)).

reasonably anticipates that the issuance of the shares will not cause such violation. For purposes of the previous sentence, any issuance of Shares that would cause inclusion in gross income or the application of any penalty provision or other provision of the Internal Revenue Code or foreign tax law shall not be treated as a violation of applicable law.

11. Rights as Stockholder . Neither the Employee nor any person claiming under or through the Employee will have any of the rights or privileges of a stockholder of the Company in respect of any Performance Share unless and until Shares have been issued in accordance with paragraph 3, 4 or 5, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Employee. Except as provided in paragraph 12, after such issuance, recordation, and delivery, the Employee will have all the rights of a stockholder of the Company with respect to voting such Shares and receipt of dividends and distributions on such Shares.

12. Adjustments . The Award is subject to adjustment in accordance with Section 4.3 of the Plan.

13. Nature of Grant . In accepting the grant of Performance Shares, the Employee acknowledges that:

(a) the grant of the Performance Shares is voluntary and occasional and does not create any contractual or other right to receive future grants of Performance Shares, or benefits in lieu of Performance Shares, even if Performance Shares have been granted repeatedly in the past;

(b) all decisions with respect to future Performance Share grants, if any, will be at the sole discretion of the Company;

(d) the Employee is voluntarily participating in the Plan;

(e) the Performance Shares are an extraordinary item that do not constitute compensation of any kind for services of any kind rendered to the Company or the Employer, and which are outside the scope of the Employee’s employment contract, if any;

(f) the Performance Shares and the Shares subject to the Performance Shares are not intended to replace any pension rights or compensation;

(g) the Performance Shares are not part of normal or expected compensation or salary for any purposes, including, but not limited to, calculating any severance, resignation, termination, redundancy, dismissal, end of service payments, bonuses, long-service awards, pension or retirement or welfare benefits or similar payments and in no event should be considered as compensation for, or relating in any way to, past services for the Company or the Employer;

(h) the Performance Shares grant and the Employee’s participation in the Plan will not be interpreted to form an employment contract or relationship with the Company or any Affiliate;

(j) in consideration of the grant of the Performance Shares, no claim or entitlement to compensation or damages shall arise from forfeiture of the Performance Shares resulting from Employee’s Termination of Service with the Employer (for any reason whatsoever and whether or not in breach of local labor laws) and the Employee irrevocably releases the Employer from any such claim that may arise; if, notwithstanding the foregoing, any such claim is found by a court of competent jurisdiction to have arisen, the Employee shall be deemed irrevocably to have waived his or her entitlement to pursue such claim; and

(k) the Performance Shares and the benefits under the Plan, if any, will not automatically transfer to another company in the case of a merger, take-over or transfer of liability.

The Employee understands that the Company and its Affiliates may hold certain personal information about the Employee, including, but not limited to, the Employee’s name, home address and telephone number, date of birth, social insurance number or other identification number, salary, nationality, job title, any Shares or directorships held in the Company or any Affiliate, details of all Performance Shares or any other entitlement to Shares awarded, canceled, exercised, vested, unvested or outstanding in the Employee’s favor, for the exclusive purpose of implementing, administering and managing the Plan (“Personal Data”).

The Employee understands that Personal Data may be transferred to any third parties assisting in the implementation, administration and management of the Plan, that these recipients may be located in the United States, the Employee’s country, or elsewhere, and that the recipient’s country may have different data privacy laws and protections than the Employee’s country. The Employee understands that he or she may request a list with the names and addresses of any potential recipients of the Personal Data by contacting the Employee’s local human resources representative. The Employee authorizes the recipients to receive, possess, use, retain and transfer the Personal Data, in electronic or other form, for the purposes of implementing, administering and managing the Employee’s participation in the Plan, including any requisite transfer of such Personal Data as may be required to a broker or other third party with whom the Employee may elect to deposit any Shares received upon vesting of the Performance Shares. The Employee understands that Personal Data will be held only as long as is necessary to implement, administer and manage the Employee’s participation in the Plan. The Employee understands that he or she may, at any time, view Personal Data, request additional information about the storage and processing of Personal Data, require any necessary amendments to Personal Data or refuse or withdraw the consents herein, without cost, by contacting in writing the Employee’s local human resources representative. The Employee understands that refusal or withdrawal of consent may affect the Employee’s ability to participate in the Plan or to realize benefits from the Performance Shares. For more information on the consequences of the Employee’s refusal to consent or withdrawal of consent, the Employee understands that he or she may contact his or her local human resources representative.

17. Committee Authority . The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any portion of the Performance Share has vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon the Employee, the Company and all other interested persons. No member of the Committee will be personally liable for any action, determination or interpretation made in good faith with respect to the Plan or this Agreement.

18. No Modification of At-Will Status . Employee understands and agrees that this Agreement does not impact in any way the right of the Employer to terminate or change the terms of the employment of Employee at any time for any reason whatsoever, with or without good cause provided in accordance with applicable local law. Employee understands and agrees that unless contrary to applicable local law or there is an employment contract in place providing otherwise, his or her employment is “at-will” and that either the Employer or Employee may terminate Employee’s employment at any time and for any reason subject to applicable local law. Employee also understands and agrees that his or her “at-will” status (if applicable) can only be changed by an express written contract signed by an authorized officer of the Company and Employee if the Employee’s employer is the Company.

19. Non-Transferability of Award . Except as otherwise herein provided, the Performance Shares herein granted and the rights and privileges conferred hereby will not be transferred, assigned, pledged or hypothecated in any way (whether by operation of law or otherwise) and will not be subject to sale under execution, attachment or similar process. Upon any attempt to transfer, assign, pledge, hypothecate or otherwise dispose of such Performance Share, or of any right or privilege conferred hereby, contrary to the provisions hereof, or upon any attempted sale under any execution, attachment or similar process upon the rights and privileges conferred hereby, such Performance Share and the rights and privileges conferred hereby will immediately become null and void.

20. Binding Agreement . Subject to the limitation on the transferability of the Performance Share contained herein, this Agreement shall be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors and assigns of the Employee and the Company.

22. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

29. Appendix B . Notwithstanding any provisions in this Agreement, the Performance Shares shall be subject to any special terms and conditions set forth in any Appendix to this Agreement for Employee’s country. Moreover, if the Employee relocates to one of the countries included in Appendix B, the special terms and conditions for such country will apply to the Employee, to the extent Company determines that the application of such terms and conditions is necessary or advisable in order to comply with local law or facilitate the administration of the Plan. As stated above, Appendix B constitutes part of this Agreement.

30. Imposition of Other Requirements . The Company reserves the right to impose other requirements on Employee’s participation in the Plan, on the Performance Shares and on any Shares acquired under the Plan, to the extent the Company determines it is necessary or advisable in order to comply with local law or facilitate the administration of the Plan, and to require the Employee to sign any additional agreements or undertakings that may be necessary to accomplish the foregoing.

* * *

APPENDIX B

ADDITIONAL TERMS AND CONDITIONS OF THE GAP, INC.

PERFORMANCE SHARE AGREEMENT

NON-U.S. EMPLOYEES

Terms and Conditions

Notifications

This Appendix also includes country-specific information of which Employee should be aware with respect to his or her participation in the Plan. The information is based on the securities, exchange control and other laws in effect in the respective countries as of May 2011. Such laws are often complex and change frequently. As a result, the Company strongly recommends that Employee does not rely on the information noted herein as the only source of information relating to the consequences of Employee’s participation in the Plan because the information may be out of date at the time that Employee vests in Performance Shares or sells Shares acquired under the Plan.

CANADA

Settlement of Performance Shares. Notwithstanding any discretion or anything to the contrary in the Plan, the grant of the Performance Shares does not provide any right for Employee to receive a cash payment and the Performance Shares will be settled in Shares only.

The following provisions will apply to Employees who are residents of Quebec:

Authorization to Release and Transfer Necessary Personal Information. This provision supplements paragraph 15 of Appendix A of the Agreement:

Employee hereby authorizes the Company and the Company’s representatives to discuss with and obtain all relevant information from all personnel, professional or not, involved in the administration and operation of the Plan. Employee further authorizes the Company, its Affiliates and the Committee, which administers the Plan, to disclose and discuss the Plan with their advisors. Employee further authorizes the Company and any Affiliate to record such information and to keep such information in Employee’s employee file.

FRANCE

Taxation of Award. This Award is not intended to be French tax-qualified.

Language Consent. In accepting the grant of the Performance Shares and the Agreement which provides for the terms and conditions of the Performance Shares, Employee confirms that he or she has read and understood the documents relating to the Performance Shares (the Plan and the Agreement), which were provided in the English language. Employee accepts the terms of these documents accordingly.

HONG KONG

Securities Law Notice. The Performance Shares and Shares issued upon vesting (if any) do not constitute a public offering of securities under Hong Kong law and are available only to Employees of the Company and its Affiliates. The Agreement, including this Appendix B, the Plan and other incidental communication materials have not been prepared in accordance with and are not intended to constitute a “prospectus” for a public offering of securities under the applicable securities legislation in Hong Kong. Nor have the documents been reviewed by any regulatory authority in Hong Kong. The Award is intended only for the personal use of each eligible Employee of the Company or its Affiliates and may not be distributed to any other person. If Employee is in any doubt about any of the contents of the Agreement, including this Appendix B, or the Plan, Employee should obtain independent professional advice.

Vesting of Performance Shares and Sale of Shares. In the event the Employee’s Performance Shares vest and Shares are issued to the Employee within six months of the date of grant, the Employee agrees that he or she will not dispose of any of such Shares prior to the six-month anniversary of the date of grant.

INDIA

Tax Information . The amount subject to tax at vesting may be dependent upon a valuation of Shares from a Merchant Banker in India. The Company has no responsibility or obligation to obtain the most favorable valuation possible nor obtain valuations more frequently than required under Indian tax law.

INDONESIA

KOREA

PEOPLE’S REPUBLIC OF CHINA

Mandatory Sale of Shares Upon Vesting. By accepting the Performance Shares, the Employee acknowledges and agrees that the immediate sale of the Shares issued upon the vesting of Performance Shares is required unless the Company, in its sole discretion, determines otherwise. Such Shares will be transferred to a brokerage firm designated by the Company (the “Brokerage Firm”). The Brokerage Firm, on the Employee’s behalf, may thereafter immediately sell the Shares at the prevailing market price pursuant to any process for the sale set forth by the Company, and deliver the proceeds less the Tax-Related Items and any broker fees, to the Company or its designee, which would then remit the net proceeds to the Employee through the Company’s or Affiliate’s special purpose bank account in China. As a result of the immediate sale of Shares as set forth in this Appendix B, no Shares would be delivered to the Employee, and the Employee would not have any resulting rights as a shareholder of the Company.

Special Administration in China . The Employee’s ability to be issued Shares at vesting shall be contingent upon the Company or its Affiliate obtaining approval from the State Administration of Foreign Exchange (“SAFE”) for Employee’s participation in the Plan (to the extent required as determined by the Company in its sole discretion) and the establishment of a SAFE-approved bank account. If at the time of vesting, SAFE approval has not been obtained, the Company may cancel this award of Performance Shares with no liability, compensation or benefits in lieu of compensation due to Employee. Employee understands and agrees that he or she will be required to immediately repatriate the proceeds from the vesting/ immediate sale of Shares to China. Employee further understands that such repatriation of proceeds may need to be effected through a special foreign exchange account established by the Company or Affiliate and Employee hereby consents and agrees that the proceeds from the vesting/ immediate sale of Shares may be transferred to such special account prior to being delivered to Employee’s personal account. Furthermore, Employee understands that due to SAFE approval requirements, there may be delays in delivering the proceeds to Employee, Employee will bear any exchange rate risk during the period between vesting and when the proceeds are delivered to him or her, Employee may be required to open a U.S. dollar bank account to receive the proceeds and also Employee may be required to pay the Company or an Affiliate the taxes due at vesting prior to receiving the proceeds from vesting/ immediate sale of Shares.

Please note that these special administration procedures will not apply to non Chinese Nationals.

SINGAPORE

Securities Law Notice . The grant of the Award is made in reliance on section 273(1)(f) of the Securities and Futures Act (Cap. 289) (“SFA”) for which it is exempt from the prospectus and registration requirements under the SFA.

Company’s local entity in Singapore or the form of the notification, he or she should consult with his or her personal legal advisor.

UNITED KINGDOM

Tax and National Insurance Contributions Acknowledgment. The following provision supplements paragraph 10 of the Agreement:

Employee agrees that if Employee does not pay or the Employer or the Company does not withhold from Employee the full amount of Tax-Related Items that Employee owes in connection with the vesting of the Award and/or the acquisition of Shares pursuant to the vesting of the Award, or the release or assignment of the Award for consideration, or the receipt of any other benefit in connection with the Award (the “ Taxable Event ”) within ninety (90) days after the Taxable Event, or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, then the amount that should have been withheld shall constitute a loan owed by Employee to the Employer, effective ninety (90) days after the Taxable Event. Employee agrees that the loan will bear interest at the official rate of HM Revenue and Customs (“HMRC”) and will be immediately due and repayable by Employee, and the Company and/or the Employer may recover it at any time thereafter by withholding the funds from salary, bonus or any other funds due to Employee by the Employer, by withholding in Shares issued upon vesting of the Award or from the cash proceeds from the sale of such Shares or by demanding cash or a cheque from Employee. Employee also authorizes the Company to withhold the transfer of any Shares unless and until the loan is repaid in full.

* * *

Exhibit 10.10

Grant No.

THE GAP, INC.

DIRECTOR STOCK UNIT AGREEMENT

The Gap, Inc. (the “Company”) hereby grants to (the “Director”), the number of Stock Units under the Company’s 2011 Long-Term Incentive Plan (the “Plan”) indicated below. This award is subject to all of the terms and conditions contained in this Director Stock Unit Agreement (the “Agreement”), including the terms and conditions contained in the attached Appendix A and the Plan. The date of this Agreement is . Subject to the provisions of Appendix A and of the Plan, the principal features of this award are as follows:


Date of Grant:

Number of Stock Units:

Vesting of Stock Units (“Vesting Schedule”):		100% of the Stock Units shall be immediately vested upon the Date of Grant.

Your signature below indicates your agreement and understanding that this award is subject to all of the terms and conditions contained in Appendix A and the Plan. PLEASE BE SURE TO READ ALL OF APPENDIX A AND THE PLAN, WHICH CONTAINS THE SPECIFIC TERMS AND CONDITIONS OF THIS AWARD.

IN WITNESS WHEREOF, the Company and the Director have executed this Agreement, in duplicate, to be effective as of the day and year first above written.


						THE GAP, INC.

Date:

My signature below indicates that I understand that this award is subject to all of the terms and conditions of this Agreement (including the attached Appendix A) and of the Plan.


						DIRECTOR

Dated:

						Address:

APPENDIX A

TERMS AND CONDITIONS OF STOCK UNIT GRANT

1. Grant of Stock Units . The Company hereby grants to the Director under the Plan the number of Stock Units indicated on the first page of this Agreement subject to the terms and conditions set forth in this Agreement and the Plan.

2. Company’s Obligation to Pay . On any date, a Stock Unit has a value equal to the Fair Market Value of one Share. Unless and until the Stock Units have vested in accordance with the Vesting Schedule set forth on the first page of this Agreement, the Director will have no right to payment of the Stock Units. Prior to actual payment of any vested Stock Units, Stock Units represent an unsecured obligation of the Company, payable (if at all) only from the general assets of the Company.

3. Payment .

(a) General Rule. Vested Stock Units will be paid to the Director in full Shares (with the balance, if any, in cash) as soon as practicable (but not more than ninety (90) days) following the date which is three (3) years from the Date of Grant, subject to paragraph 5.

(b) Election to Defer Payment. Notwithstanding paragraph 3(a), at the discretion of the Committee and in accordance with the Plan, Code Section 409A and such rules established by the Committee, the Director may elect to further defer delivery of the proceeds due with respect to his or her vested Stock Units by properly completing and submitting a Stock Unit Deferral Election Form (the “Election Form”) to the Company in accordance with the directions on the Election Form and the procedures established by the Committee.

(c) Termination of Service. Notwithstanding paragraphs 3(a) and 3(b), in the event that the Director incurs a separation from service (within the meaning of Code Section 409A) for any reason, including, but not limited to, death, Disability, or Retirement, the vested Stock Units will be paid to the Director (or in the event of the Director’s death, to his or her estate) as soon as practicable following the date of such separation from service, except as provided by paragraph 8, and in each case subject to paragraph 5.

(d) Change in Control. Notwithstanding paragraphs 3(a) and 3(b), in order for the Committee to determine that the deferral of delivery of the proceeds due with respect to any vested Stock Units will terminate on account of a change in control or other similar transaction or event, such change in control or other similar transaction or event must constitute a change in the ownership or effective control of the Company, or in the ownership of a substantial portion of the assets of the Company (as determined in accordance with section 409A(a)(2)(A)(v) of the U.S. Internal Revenue Code of 1986, as amended and Treasury Regulation Section 1.409A-3(i)(5)). Upon such a termination of the deferral, the vested Stock Units will be paid to the Director as soon as practicable following the date of such change in control or other similar transaction or event (subject to paragraph 5).

4. Death of Director . Any distribution or delivery to be made to the Director under this Agreement will, if the Director is then deceased, be made to the Director’s designated beneficiary to the extent such designation is valid under applicable law. If the Director has not designated a then living beneficiary, distributions and deliveries will be made to the administrator or executor of the Director’s estate. Any such administrator or executor must furnish the Company with (a) written notice of his or her status as transferee, and (b) evidence satisfactory to the Company to establish the validity of the transfer and compliance with any laws or regulations pertaining to said transfer.

5. Withholding of Taxes . The Director agrees that the Company will withhold a portion of the Shares scheduled to be issued pursuant to vested Stock Units that have an aggregate market value sufficient to pay the federal, state and local income, employment and any other applicable taxes required to be withheld by the Company or its designated Affiliate, determined at minimum statutory withholding rates. The Company will only withhold whole Shares and therefore the Director also authorizes deduction without notice from amounts payable to the Director in cash in an amount sufficient to satisfy the Company’s remaining tax withholding obligation. Notwithstanding the previous two sentences, the Director, if the Company in its sole discretion so agrees, may elect to furnish to the Company written notice, no more than 30 days and no less than 5 days in advance of the date the

vested Stock Units are scheduled to be paid (in accordance with paragraph 3), of his or her intent to satisfy the tax withholding requirement by remitting the full amount of the tax withholding to the Company on this date. In the event that Director provides such written notice and fails to satisfy the tax withholding requirement by the date the vested Stock Units are scheduled to be paid (in accordance with paragraph 3), the Company shall satisfy the tax withholding requirement pursuant to the first two sentences of this section.

6. Rights as Stockholder . Subject to paragraph 7, neither the Director nor any person claiming under or through the Director will have any of the rights or privileges of a stockholder of the Company in respect of any Shares deliverable hereunder unless and until certificates representing such Shares have been issued, recorded on the records of the Company or its transfer agents or registrars, and delivered to the Director. After such issuance, recordation, and delivery, the Director will have all the rights of a stockholder of the Company with respect to such Shares.

7. Dividend Equivalents . The Director shall be entitled to receive Dividend Equivalents paid on Shares underlying the Stock Units. Any Dividends Equivalents automatically shall be deemed reinvested in Stock Units annually on each anniversary after the date of grant or, if earlier, the settlement of the Stock Units (the “Dividend Equivalent Stock Units”). Dividend Equivalent Stock Units shall be subject to the same terms and conditions as the Stock Units, including any deferral election.

8. Section 409A . Notwithstanding anything in the Plan or this Agreement to the contrary, if at the time of the Director’s “separation from service” within the meaning of Section 409A, as determined by the Company other than due to the Director’s death (x) the Director is a “specified employee” within the meaning of Section 409A at the time of such separation and (y) the payment of any vested Stock Units that become payable as a result of such separation will result in the imposition of additional tax under Section 409A if paid to the Director on or within the six (6) month period following the Director’s separation from service, then the payment of such vested Stock Units will not be made until the date six (6) months and one day following the date of the Director’s separation from service, subject to paragraph 5, unless the Director dies following his or her separation from service, in which case, the vested Stock Units will be paid in Shares to the Director’s estate upon his or her death, subject to paragraph 5. It is the intent of this Agreement to comply with the requirements of Section 409A so that none of the Stock Units provided under this Agreement or Shares issuable thereunder will be subject to the additional tax imposed under Section 409A, and any ambiguities herein will be interpreted to so comply. For purposes of this Agreement, “Section 409A” means Section 409A of the U.S. Internal Revenue Code of 1986, as amended, and any proposed, temporary or final Treasury Regulations and Internal Revenue Service guidance thereunder, as each may be amended from time to time.

9. No Effect on Service . The transactions contemplated hereunder and the vesting schedule set forth on the first page of this Agreement do not constitute an express or implied promise of continued service for any period of time. The terms of the Director’s service shall not be affected by the grant of this award.

10. Address for Notices . Any notice to be given to the Company under the terms of this Agreement must be addressed to the Company, in care of its Legal Department, at The Gap, Inc., Two Folsom, San Francisco, California 94105, or at such other address as the Company may hereafter designate in writing. Any notice to be given to the Director will be addressed to the Director at the address set forth on the records of the Company. Any such notice will be deemed to have been duly given if and when enclosed in a properly sealed envelope, addressed as aforesaid, and deposited, postage prepaid, in a United States post office.

11. Grant is Not Transferable . Except as otherwise expressly provided herein, this grant, and the rights and privileges conferred hereby, may not be transferred, assigned, pledged, or hypothecated in any way (whether by operation of law or otherwise) and may not be subject to sale under execution, attachment, or similar process. Upon any attempt to transfer, assign, pledge, hypothecate, or otherwise dispose of this grant, or any right or privilege conferred hereby, or upon any attempted sale under any execution, attachment, or similar process, this grant and the rights and privileges conferred hereby immediately will become null and void.

12. Restrictions on Sale of Securities . The Shares issued as payment for vested Stock Units awarded under this Agreement shall be registered under the federal securities laws and shall be freely tradable upon receipt. However, the Director’s subsequent sale of the Shares shall be subject to any market blackout-period that may be imposed by the Company and must comply with the Company’s insider trading policies, and any other applicable securities laws.

13. Binding Agreement . Subject to the limitation on the transferability of this grant contained herein, this Agreement will be binding upon and inure to the benefit of the heirs, legatees, legal representatives, successors, and assigns of the Company and the Director.

14. Additional Conditions to Issuance of Certificates for Shares . The Shares deliverable to the Director may be either previously authorized but unissued Shares or issued Shares that have been reacquired by the Company. Solely for purposes of Delaware corporate law, par value for the Shares actually delivered to the Director for the Stock Units will be deemed satisfied by past services rendered by the Director. The Company shall not be required to issue any Shares hereunder so long as the Company reasonably anticipates that such issuance will violate Federal securities law or other applicable law; provided however, that in such event the Company shall issue such Shares at the earliest possible date at which the Company reasonably anticipates that the issuance of the Shares will not cause such violation. For purposes of the previous sentence, any issuance of Shares that would cause inclusion in gross income or the application of any penalty provision or other provision of the Code shall not be treated as a violation of applicable law.

15. Plan Governs . This Agreement is subject to all terms and provisions of the Plan. In the event of a conflict between one or more provisions of this Agreement and one or more provisions of the Plan, the provisions of the Plan will govern. Capitalized terms used and not defined in this Agreement will have the meaning set forth in the Plan.

16. Committee Authority . The Committee will have the power to interpret the Plan and this Agreement and to adopt such rules for the administration, interpretation, and application of the Plan as are consistent therewith and to interpret or revoke any such rules (including, but not limited to, the determination of whether or not any Stock Units have vested). All actions taken and all interpretations and determinations made by the Committee in good faith will be final and binding upon the Director, the Company, and all other interested persons. No member of the Committee will be personally liable for any action, determination, or interpretation made in good faith with respect to the Plan or this Agreement.

17. Captions . Captions provided herein are for convenience only and are not to serve as a basis for interpretation or construction of this Agreement.

18. Agreement Severable . In the event that any provision in this Agreement will be held invalid or unenforceable, such provision will be severable from, and such invalidity or unenforceability will not be construed to have any effect on, the remaining provisions of this Agreement.

19. Modifications to the Agreement . This Agreement constitutes the entire understanding of the Company and the Director on the subjects covered, including the Director’s right to receive a grant of stock units under Section 9 of the Plan. The Director expressly warrants that he or she is not accepting this Agreement in reliance on any promises, representations, or inducements other than those contained herein. Modifications to this Agreement or the Plan can be made only in an express written agreement executed by a duly authorized officer of the Company. Notwithstanding anything to the contrary in the Plan or this Agreement, the Company reserves the right to revise this Agreement as it deems necessary or advisable, in its sole discretion and without the consent of the Director, to comply with Section 409A of the Code or to otherwise avoid imposition of any additional tax or income recognition under Section 409A of the Code in connection with these Stock Units (including settlement or payment thereof).

20. Amendment, Suspension or Termination of the Plan . By accepting this award, the Director expressly warrants that he or she has received a right to an equity based award under the Plan, and has received, read, and understood a description of the Plan. The Director understands that the Plan is discretionary in nature and may be modified, suspended, or terminated by the Company at any time.

21. Notice of Governing Law . This grant of Stock Units shall be governed by, and construed in accordance with, the laws of the State of California without regard to principles of conflict of laws.

***

THE GAP, INC.

2011 LONG-TERM INCENTIVE PLAN

STOCK UNIT DEFERRAL ELECTION FORM

Complete and return this Election Form if you want to defer the settlement (payment) of stock units granted to you under The Gap, Inc. 2011 Long-Term Incentive Plan (the “Plan”).

Stock units that are granted to you under the Plan (“Stock Units”) generally become payable as soon as practicable after the date which is three (3) years from the date of vesting (the “Original Payment Date”) in whole shares of common stock of The Gap, Inc. (the “Company”), with the balance, if any, in cash. Stock Units are immediately one hundred percent (100%) vested upon the Date of Grant. The Committee (as defined in the Plan) permits you to defer the settlement of your Stock Units beyond the Original Payment Date on a tax-deferred basis in accordance with the terms of the Plan. To achieve this favorable tax result, the amounts deferred will represent an unfunded and unsecured promise to pay on behalf of the Company. With respect to any amounts that you defer, you will become a general, unsecured creditor of the Company, which means that your deferral remains subject to the claims of the Company’s creditors, and, if the Company’s assets are insufficient to pay all of its creditors, you may not receive part or all of your deferral.

Please note that the Plan has been amended to comply with Section 409A of the Internal Revenue Code (“Section 409A”). As a result, any deferral elections made with respect to Stock Units must comply with the requirements of Section 409A. This means that deferral elections can be accepted and become effective only if the following requirements (the “Deferral Requirements”) are satisfied: (a) the deferral election must be made at least twelve (12) months before the Original Payment Date; (b) the deferral election must defer the payment of the Stock Units for a period of not less than five (5) years from the Original Payment Date; and (c) the deferral election may not take effect until at least twelve (12) months after the date on which the election is made.

Notwithstanding the foregoing and any election made hereunder, in accordance with paragraph 3(c) of the Stock Unit Agreement applicable to your Stock Units, the vested Stock Units will be paid to you (or in the event of your death, to your estate) as soon as practicable following the date you incur a Termination of Service for any reason, including, but not limited to, death, Disability, or Retirement (as such terms are defined in the Plan); provided, however, that payment will be made no earlier than six (6) months and one (1) day following the date of termination to the extent necessary to comply with Section 409A. In addition, in accordance with paragraph 3(d), of the Stock Unit Agreement applicable to your Stock Units, the vested Stock Units will be paid to you (or in the event of your death, to your estate) as soon as practicable following the date of certain changes in control of the Company or other similar events.

I. PERSONAL INFORMATION (Please Print)

Director Name: (the “Director”)

II. STOCK UNIT DEFERRAL ELECTION (Choose One)

Payment of the Stock Units indicated below will be made as soon as practicable following the date you choose below (the “Designated Payment Date”), provided that the Deferral Requirements are satisfied. This means that your Designated Payment Date will be given effect only if (a) you complete and return this Election Form at least twelve (12) months before the Original Payment Date, and (b) the Designated Payment Date is at least five (5) years from the Original Payment Date. As noted above, any payment will be made in the form of whole shares of Company common stock with the balance, if any, in cash.


		I DO NOT wish to further defer the settlement (i.e., payment) of the Stock Units granted to me under the Plan on (insert year), past the “Original Payment Date” of .

		OR

		I elect to defer the settlement (i.e., payment) of the Stock Units granted to me under the Plan in (insert year) until , 20 (specify a date that is at least five (5) years from Original Payment Date of the Stock Units).


		OR

		Until I notify the Company otherwise, I elect to defer the settlement of all Stock Units granted to me under the Plan on or after (insert date of earliest award to be deferred) until the date that is years (must be at least five (5) years) from the Original Payment Date(s) applicable to such Stock Units.

IMPORTANT: Please note that if the Original Payment Date is within twelve (12) months of the date you complete and return this Election Form then, due to Section 409A requirements, we cannot accept your deferral election and it will be deemed null and void. This means that payment of the Stock Units will be made as soon as practicable after the Original Payment Date regardless of your deferral election.

Any amounts deferred will be taxable as ordinary income in the year paid. Please seek advice from your professional tax advisor before making your deferral election.

III. DIRECTOR SIGNATURE

I acknowledge that I have read and reviewed a copy of the Plan’s prospectus. I understand that my decision to defer the settlement of Stock Units will make me only a general, unsecured creditor of the Company. I also understand that the amounts deferred will be taxable as ordinary income in the year paid. If the Company determines that it is required to withhold for any taxes, including, but not limited to, income or employment taxes, prior to the date of deferred payout, I agree that, if I do not make other arrangements that are satisfactory to the Committee, in its sole discretion, the Company will withhold from the amounts due to me. I also understand that, upon receipt of deferred payouts, in addition to federal taxes, I may owe taxes both (1) to the state where I resided at the time of making this election and, if different, (2) to the state where I reside when I receive a deferred payout.

The Committee shall have the discretion to make all determinations and decisions regarding this deferral election. To the extent the Committee determines that this election does not comply with applicable laws, now or in the future, this election shall be null and void. In such an event, amounts deferred shall be settled (1) immediately if the Original Payment Date already has occurred, or (2) upon the Original Payment Date if in the future.

By signing this Election Form, I authorize implementation of the above instructions. I understand that the deferral elections that I have made on this Election Form are generally irrevocable and may not be changed in the future except in accordance with the requirements of Section 409A and the procedures specified by the Committee.


DIRECTOR

Signed:				Date:

Agreed to and accepted:

THE GAP, INC.

By:				Date:

Title:

Exhibit 31.1

CERTIFICATIONS

I, Glenn K. Murphy, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Gap, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a)

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2011

/s/ Glenn K. Murphy

Glenn K. Murphy

Chairman and Chief Executive Officer

(Principal Executive Officer)

Exhibit 31.2

CERTIFICATIONS

I, Sabrina L. Simmons, certify that:

1.	I have reviewed this quarterly report on Form 10-Q of The Gap, Inc.;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(a)

(b)

(c)

(d)

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a)

(b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: June 8, 2011

/s/ Sabrina L. Simmons

Sabrina L. Simmons

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

Exhibit 32.1

Certification of the Chief Executive Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of The Gap, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Glenn Murphy, Chairman and Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Glenn K. Murphy

Glenn K. Murphy

Chairman and Chief Executive Officer

Date: June 8, 2011

Exhibit 32.2

Certification of the Chief Financial Officer

Pursuant to 18 U.S.C. Section 1350,

As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Quarterly Report of The Gap, Inc. (the “Company”) on Form 10-Q for the period ended April 30, 2011 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Sabrina L. Simmons, Executive Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. §1350, as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Sabrina L. Simmons

Sabrina L. Simmons

Executive Vice President and Chief Financial Officer

Date: June 8, 2011

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