Exhibit 10.3

Grant No.             

THE GAP, INC.

NON-QUALIFIED STOCK OPTION AGREEMENT

The Gap, Inc. (the “Company”) hereby grants to Paul S. Pressler (the
“Employee”), a stock option under The Gap, Inc. 2006 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 Agreement, including the terms and conditions contained in the attached
Appendix A. The date of this Agreement is                     . Subject to the
provisions of Appendix A and of the Plan, the principal features of this option
are as follows:

 

Number of Shares

Purchasable with this Option:

  

________

Price per Share:

  

$________

Date Option was Granted:

  

________

Date Option is

Scheduled to become Exercisable:

  

________

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’s employment as Chief Executive Officer ends
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, WHICH CONTAINS THE
SPECIFIC TERMS AND CONDITIONS OF THIS OPTION.

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:                     

           

Robert Fisher

   

Chairman of the Board

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

 

   

EMPLOYEE

Dated:                     

              

Address:

                          

     

Social Security No.:

    

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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 “Option Price”) shall be
equal to the price set forth on page 1 of this Agreement. The Option Price shall
be payable in the legal tender of the United States.

3. Number of Shares. The number and class of Shares specified in paragraph 1
above, and/or the Option Price, are subject to appropriate adjustment in the
event of changes in the capital stock of the Company by reason of stock
dividends, split-ups or combinations of shares, reclassifications, mergers,
consolidations, reorganizations or liquidations. 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 as the Chief Executive Officer of the Company or an Affiliate through
such date(s). If Employee is not employed as the Chief Executive Officer 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
defined from time to time by the Committee) since the date of this Agreement.
The duration of the period of postponement shall equal the duration of the
personal leave of absence. If Employee does not return from the personal leave
of absence, the option shall terminate as set out in paragraph 6.

6. Termination of Option. In the event that Employee’s employment as Chief
Executive Officer of the Company or an Affiliate terminates for any reason other
than Retirement (as defined in the Plan) 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. 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 terminates employment as Chief Executive Officer of
the Company due to Retirement, this option shall immediately thereupon
terminate.

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, 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, by the person or persons
entitled to the option under Employee’s will, 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 the Company determines is required to be withheld by
reason of such exercise), and (b) by giving satisfactory assurances in writing
if requested by the Company, signed by the

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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.

10. 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.

11. No Right to Continued Employment. Employee understands and agrees that this
Agreement does not impact in any way the right of the Company, or the Affiliate
employing Employee, as the case may be, to terminate or change the terms of the
employment of Employee at any time for any reason whatsoever, with or without
good cause. Employee understands and agrees that his or her employment is
“at-will” and that either the Company or Employee may terminate Employee’s
employment at any time and for any reason. Employee also understands and agrees
that his or her “at-will” status can only be changed by an express written
contract signed by an authorized officer of the Company and Employee.

12. 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., 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 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.

13. 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.

14. 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.

15. 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.

16. 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.

17. 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.

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

19. 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.

20. 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.