Gap (GPS)

Control Arrangements

In September 2002, the Company entered into an employment contract with Paul S. Pressler. Under the terms of the contract, the Company agreed to retain Mr. Pressler as President and Chief Executive Officer of the Company at an annual base salary of $1,500,000. Mr. Pressler was also guaranteed a $1,875,000 bonus payable in April 2004. The contract also provides that if Mr. Pressler is terminated as Chief Executive Officer without cause or due to a change in control prior to September 25, 2007, he will remain a non-executive employee of the Company for a period of 24 months. Subject to certain conditions during the 24 months, Mr. Pressler will continue to receive his latest base salary and health insurance coverage, as well as certain bonus payouts. In addition, vesting of any remaining portion of the options granted to Mr. Pressler in 2002 that are scheduled to vest during the 24-month period will accelerate to the date of any such termination. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange Commission.

In October 2003, the Company entered into an employment contract with Nicholas J. Cullen. Under the terms of the contract, if Mr. Cullen is terminated involuntarily without cause prior to October 31, 2006, subject to certain conditions, Mr. Cullen will continue to receive an amount equal to his latest base salary for 12 months. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange

31

Table of Contents

Commission. In March 2006, Mr. Cullen’s employment terminated and the provisions of his employment contract went into effect.

Further information and details of the terms and conditions of employment contracts for our named executive officers can be found as exhibits to our Form 10-K for fiscal year 2005 filed with the Securities and Exchange Commission.

Control Arrangements

In September 2002, the Company entered into an employment contract with Paul S. Pressler. Under the terms of the contract, the Company agreed to retain Mr. Pressler as President and Chief Executive Officer of the Company at an annual base salary of $1,500,000. Mr. Pressler was also guaranteed a $1,875,000 bonus payable in April 2004. The contract also provides that if Mr. Pressler is terminated as Chief Executive Officer without cause or due to a change in control prior to September 25, 2007, he will remain a non-executive employee of the Company for a period of 24 months. Subject to certain conditions during the 24 months, Mr. Pressler will continue to receive his latest base salary and health insurance coverage, as well as certain bonus payouts. In addition, vesting of the remaining portion of the options granted to Mr. Pressler in 2002 that are scheduled to vest during the next 24-month period will accelerate to the date of any termination without cause or termination due to a change in control. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange Commission.

In January 2003, the Company entered into an employment contract with Byron H. Pollitt, Jr. Mr. Pollitt’s annual base salary is subject to annual review. Under the terms of the contract, if Mr. Pollitt is terminated involuntarily without cause prior to January 27, 2006, subject to certain conditions, Mr. Pollitt will continue to receive an amount equal to his latest base salary and a COBRA subsidy for 12 months if employment is terminated on or after January 27, 2005, but before January 27, 2006. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange Commission.

24

Table of Contents

In October 2003, the Company entered into an employment contract with Nicholas J. Cullen. Mr. Cullen’s annual base salary is subject to annual review. Under the terms of the contract, if Mr. Cullen is terminated involuntarily without cause prior to October 31, 2006, subject to certain conditions, Mr. Cullen will continue to receive an amount equal to his latest base salary for 18 months if employment is terminated prior to October 31, 2005, and for 12 months if employment is terminated on or after October 31, 2005, but before October 31, 2006. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange Commission.

In September 2004, the Company entered into an employment contract with Gary Muto. Mr. Muto’s annual base salary is subject to annual review. Under the terms of the contract, if Mr. Muto is terminated involuntarily, without cause prior to September 15, 2007, Mr. Muto will receive an amount equal to his latest base salary for 18 months if employment is terminated prior to September 15, 2005, and for 12 months if his employment is terminated on or after September 15, 2005 but before September 15, 2007. The contract also provides that Mr. Muto will receive a payment of $100,000 on or about the date that he relocates his residence to the New York City area and that he will receive an additional $70,000 and $50,000 on the first anniversary and second anniversary, respectively, of that date. The terms of the agreement were reviewed and approved by the Compensation and Management Development Committee and filed with the Securities and Exchange Commission. Mr. Muto ceased to be an executive officer in September 2004.

Further information and details of the terms and conditions of employment contracts for our named executive officers can be found as exhibits to our Form 10-K for fiscal year 2004 filed with the Securities and Exchange Commission.