Exhibit 10.1

 

October 8, 2003

 

Nick Cullen

 

Dear Nick,

 

It is our pleasure to offer you a position at Gap Inc. We’re a company driven by
passion, innovation and a focus on quality—the same characteristics we look for
in our employees. You reflect these values and we feel confident you will find
rewarding opportunities with us.

 

This letter sets forth our offer to you to join Gap Inc. as Executive Vice
President and Chief Supply Chain Officer. In this position you will report to
Paul Pressler, President and Chief Executive Officer, Gap Inc.

 

Salary. Your annual salary will be $575,000, payable every two weeks. Provided
you begin work before November 1, 2003, you are scheduled to receive a
performance and a compensation review in March 2004 based on your time in the
position.

 

Initial Bonus. In addition to your salary, you will receive a bonus of $250,000
within the first thirty days of your employment. This will be processed as
supplemental income and is subject to supplemental taxes. In the event you
voluntarily terminate your employment before one year from your start date, you
agree to repay this bonus within 90 days of your last day of employment. In the
event you voluntarily terminate your employment during your second year of
employment (after your first anniversary but before your second anniversary) you
agree to repay one-half of this bonus ($100,000) within 90 days of your last day
of employment.

 

MICAP Bonus. Based on your position as Executive Vice President and Chief Supply
Chain Officer, you will participate in the Executive Management Incentive Cash
Award Program (MICAP). MICAP provides cash incentives as a reward for achieving
company goals. MICAP bonus payments are based on Gap Inc. or Divisional
financial performance and are paid to eligible employees if goals are met. Under
the current program, you are eligible to receive an annual target bonus of 65%
up to a maximum bonus of 130% of your base salary. Bonus pay-outs will be
prorated based on time in position, divisional or country assignment and base
salary and/or incentive target changes that may occur during the performance
cycle. Management discretion can be used to modify the final reward amount.

 

For fiscal year 2003, the annual bonus target has been split into two pay-out
opportunities based on six-month performance cycles. The first bonus cycle
(first and second quarters 2003), with a target pay-out opportunity of 40% of
your annual bonus target percentage, has been completed and you will not receive
a MICAP bonus for that cycle. You are eligible to participate in the second
bonus cycle (third and fourth quarters 2003) with a target payout opportunity of
60% of your annual bonus target percentage, prorated for time in position,
provided you begin employment with Gap Inc. before November 1, 2003, and are
actively employed by Gap Inc. on the specified pay-out date.

 

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Nick Cullen

October 8, 2003

Page Two

 

Stock Options. Subject to approval by the Compensation and Management
Development Committee of the Board of Directors (“the Committee”) and the
provisions of the Company’s stock option plan, you will be granted options to
purchase 200,000 shares of Gap Inc. common stock on the date when the options
are approved by the Committee or on the first day of employment, whichever is
later (the “date of grant”). The option price shall be determined by the fair
market value of the stock on the date of grant. These options will become vested
and exercisable as shown in the schedule below, provided you are employed with
Gap Inc. on the vesting date. These options must be exercised within ten years
from the date of grant or within three months of your employment termination,
whichever is earlier, or you will lose your right to do so.

 

Option to purchase 50,000 shares vesting one year from date of grant

Option to purchase 50,000 shares vesting two years from date of grant

Option to purchase 50,000 shares vesting three years from date of grant

Option to purchase 50,000 shares vesting four years from date of grant

 

As a participant in the Focal Review process, you may be eligible for future
stock option awards

provided that you continue employment with us.

 

Financial Planning Assistance. We provide you with two choices to help you
achieve your financial goals. You have the option of one on one financial
counseling through our partnership with the AYCO Company. The first year of
counseling will be 100% company paid. Each year thereafter Gap Inc. will pay 50%
of the expense. As another option, Gap Inc. offers a reimbursement of $5,000
annually to be used with the financial planner of your choice.

 

Benefits. Gap Inc. offers a competitive benefits package designed to assist you
in securing your financial future and managing your work and personal life. In
addition to medical, dental, vision, life and income protection, you are
eligible for Gap Inc.’s LifeStyle Benefits that which include an Employee
Assistance Program, home loan services and tuition reimbursement. Gap Inc. also
offers an Employee Stock Purchase Plan, a 401(k) plan with a generous dollar for
dollar company match up to four percent of your pay (limited as provided in the
plan), and employee discounts toward merchandise you purchase in our stores as
gifts, or for yourself and your eligible dependents. You will be eligible for
thirty days of Paid Time Off on an annual basis in addition to seven
Company-paid holidays. PTO accrues each pay period based on regular hours paid,
and can be used for vacation, illness or personal business.

 

Please refer to the enclosed summary of the Company’s benefits for more
information on our extensive benefits package.

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Nick Cullen

October 8, 2003

Page Three

 

Income Continuation. In the event that Gap Inc. terminates your employment
involuntarily without cause before your third anniversary of employment, the
Company will continue to make bi-weekly payments to you based on your then
current base salary (“Income Continuation”) according to the following schedule
beginning on the day after your last day of employment:

 

  a. If your employment is terminated before your first anniversary of
employment, you will receive Income Continuation for 24 months.

 

  b. If your employment is terminated upon or after your first anniversary but
before your second anniversary of employment, you will receive Income
Continuation for 18 months.

 

  c. if your employment is terminated upon or after your second anniversary but
before your third anniversary of employment, you will receive Income
Continuation for 12 months.

 

If your employment is terminated without cause upon or after your third
anniversary of employment, you may receive severance in an amount consistent
with the Company’s then current performance severance guidelines.

 

Prior to and as a condition of receiving the Income Continuation and/or
severance described above, you must execute a full release of all claims arising
out of your employment and termination of employment with Gap Inc. During the
Income Continuation period, you agree to be reasonably available to the Company
as requested to respond to requests for information concerning matters, facts or
events relating to the Company or any Company entity about which you may be
knowledgeable.

 

If you accept new employment or establish any other professional relationship
(e.g. a consulting relationship) for which you are compensated during the
applicable Income Continuation period or if you breach your remaining
obligations to the Company (e.g. your duty to protect confidential information),
Income Continuation will cease effective on your acceptance or breach as
described herein. As a condition of receiving Income Continuation, you agree to
inform Gap Inc. within five days of your acceptance of new employment or other
compensated relationship.

 

For purposes of this agreement, “cause” shall mean termination of your
employment based on good faith determination by the CEO that your employment be
terminated for any of the following reasons: (1) indictment, conviction or
admission of any crime involving dishonesty or moral turpitude; (2)
participation in any act of fraud or malfeasance against Gap Inc.; (3)
intentional damage to any property of Gap Inc.; (4) breach of any provision of
this agreement or Gap Inc.’s Code of Business Conduct; (5) use of alcohol or
drugs which interferes with the performance of your duties under this agreement
or which compromises the integrity and reputation of Gap Inc., its employees or
products; or (6) absence from employment, other than a result of disability, for
any reason for a period of more than four weeks without prior consent by the
Board.

 

If you voluntarily resign your employment from Gap Inc. at any time or your
employment is terminated for cause, you will receive no compensation, payment or
benefits after your last day of employment. If your employment terminates for
any reason, you will not be entitled to any payments, benefits, damages, award
or compensation other than as provided in this offer.

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Nick Cullen

October 8, 2003

Page Four

 

Relocation. Gap Inc. will pay for your relocation expenses in accordance with
the Company’s relocation policy. Our Relocation Department will send you a
brochure explaining your relocation benefits and obligations. By signing this
letter you agree to abide by the terms of the Company’s relocation policy,
including its payback provisions. A relocation administrator will call you to go
over the specific components of your package and work with you throughout the
relocation process. In the meantime, if you have questions, please call our
Relocation Department at (800) 333-7899, x44357.

 

Start Date and Orientation. Your first day with the Company will be determined.
On your first day you will attend New Employee Orientation from 8:15 a.m. to
5:15 p.m. at our San Bruno campus. A Gap Inc. orientation representative will
greet you in the 901 Cherry Lobby in San Bruno. Please bring identification and
proof of authorization to work in the U.S. A complete list of appropriate
documentation is enclosed in your New Employee Orientation materials. The list
includes items such as a driver’s license and Social Security card, or a U.S.
passport. Please review the list carefully. If you have questions about
documentation, contact Employment Processes at 1-866-411-2772 x206 00

 

Proprietary Information or Trade Secrets of Others. You represent and warrant to
us that: 1) you do not have any other agreements, obligations, relationships or
commitments to any other person or entity that conflicts with accepting this
offer or performing your obligations as outlined herein; and 2) prior to your
first day of employment with Gap Inc. you will return all property and
confidential information belonging to all prior employers; and 3) you will not
disclose to us, or use, or persuade any other Gap Inc. employee to use, any
proprietary information or trade secrets of another person or entity.

 

Abide by Company Policies. You agree to abide by all applicable Company policies
including, but not limited to, policies contained in the Code of Business
Conduct. You also agree to execute and abide by the attached Confidentiality and
Non-Solicitation Agreement 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. You will receive additional information, including a
copy of the Securities Law Compliance Manual, shortly after your first day of
employment. If you wish to obtain additional information, or have questions
about the compliance manual, you may contact Frank Garcia in Gap Inc. Stock
Administration, at (415) 427-4697.

 

Employment Status. You understand that your employment is “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 or precluding Gap Inc. from
revoking this offer of employment at any time. You are free to resign at any
time. Similarly, the Company 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 the Company that contains the words “this
is an express contract of employment” and is signed by an officer of the
Company. In the event that there is any dispute over the terms, enforcement or
obligations under this agreement, the prevailing party shall be entitled to
recover from the other party reasonable attorneys fees and costs incurred to
enforce the agreement.

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Nick Cullen

October 8, 2003

Page Five

 

Please review your agreement (which incorporates the Confidentiality and
Non-Solicitation Agreement attached), sign one set of the enclosed originals and
return to Sue Robinson at Gap Inc. You may keep the other original for your
personal records. This offer is valid only until October 10, 2003, and may be
withdrawn at any time before you accept it.

 

Nick, it is our pleasure to extend this offer. We look forward to working with
you.

 

Yours sincerely,

 

/s/ PAUL PRESSLER

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Paul Pressler

President and Chief Executive Officer

Confirmed this 8th day of October, 2003

/s/ NICK CULLEN

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Nick Cullen

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CONFIDENTIALITY & NON-SOLICITATION AGREEMENT

 

Nick Cullen (“Employee”) acknowledges that the services he will perform for Gap
Inc. are unique and extraordinary and that he will be in a relationship of
confidence and trust with Gap Inc. As a result, during his employment with Gap
Inc., he will acquire “Confidential Information” that is (1) owned or controlled
by Gap Inc., (2) in the possession of Gap Inc. and belonging to third parties,
and/or (3) conceived, originated, discovered or developed in whole or in part by
Employee. Confidential Information includes trade secrets and other confidential
or proprietary business, technical, strategic, marketing, legal, personnel or
financial information, whether or not Employee’s work product, in written,
graphic, oral or other tangible or intangible forms, including, but not limited
to strategic plans, specifications, records, data, computer programs, drawings,
diagrams, models, employee, vendor or customer names or lists, business or
marketing plans, studies, analyses, projections and reports, communications by
or to attorneys (including attorney client privileged communications), memoranda
and other materials prepared by attorneys or under their direction (including
attorney work product), and software systems and processes. Any information that
is not readily available to the public shall be considered to be a trade secret
and confidential and proprietary.

 

Employee agrees that he will keep the Confidential Information in strictest
confidence and trust, and 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 Employee’s employment,
except as is necessary in the ordinary course of performing Employee’s duties
while employed by Gap Inc.

 

Employee also agrees that in the event of his employment termination for any
reason, he 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.

 

Additionally, Employee agrees that so long as he is employed by Gap Inc., and
for a period of one year thereafter, Employee will not, directly or indirectly,
on behalf of Employee, any other person or entity, solicit, call upon, recruit,
or attempt to solicit any of Gap Inc.’s employees, consultants, customers, or
vendors. Employee further agrees that he will not directly or indirectly, on
behalf of Employee, 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.

 

ACKNOWLEDGED AND AGREED TO THIS 8th DAY OF OCTOBER, 2003.

 

/s/ NICK CULLEN

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Nick Cullen