Gap (GPS)

Adoption of Performance Goals for Paul Pressler for Fiscal 2005 Cash and Performance Unit Awards

On March 11, 2005, the Committee also named Paul Pressler as a participant eligible to earn cash and performance unit awards under the Executive Management Incentive Compensation Award Plan (“Executive MICAP”), as amended January 25, 2005 (subject to shareholder approval), based on performance during the 2005 fiscal year and established performance goals and target award percentages for Mr. Pressler.

The cash award payable under Executive MICAP to Mr. Pressler will be based on the financial performance of Gap Inc. The financial performance of Gap Inc. shall be based on the achievement of the following objective performance goals (each as defined in the Executive MICAP): 70% depends on the Earnings of Gap Inc.; 20% depends on the Economic Profit of Gap Inc.; and 10% depends on the Free Cash Flow of Gap Inc. The base target award percentage

(as a percentage of base salary) for the cash award for Mr. Pressler is as set forth below. The actual cash award payable under the Executive MICAP to Mr. Pressler can range from 0 to 250% of his base salary depending upon the extent to which the financial performance of Gap Inc. meets, exceeds or is below target.

The award payable in performance units, issued pursuant to the Company’s 1996 Stock Option and Award Plan, to Mr. Pressler under Executive MICAP will be based 100% on year-over-year growth in Earnings Per Share of Gap Inc. (as defined in the Executive MICAP). The base target award percentage (as a percentage of base salary) for the performance unit award for Mr. Pressler is as set forth below. The actual performance unit award payable under the Executive MICAP can have a value that ranges from 0% to 100% of Mr. Pressler’s base salary depending upon the extent to which the growth in Earnings Per Share for Gap Inc. meets, exceeds or is below target. In determining the number of performance units awarded to Mr. Pressler, the value of each performance unit shall equal the average of the high and low prices at which a share of the Company’s common stock traded on the date of award, rounded down to the nearest whole unit. Each performance unit award will be granted pursuant to the Gap Inc. Stock Award Agreement and will be subject to vesting as determined by the Committee on the date of award.