Form of Nonqualified Stock Option Agreement



 Exhibit 10.5 
  
 Grant No. _____ 
  
 THE GAP, INC. 
 NON-QUALIFIED STOCK
OPTION AGREEMENT 
  
 The Gap, Inc. (the “Company”) hereby grants to
________________(the “Employee”), a stock option under The Gap, Inc. 1996 Stock Option and Award 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 of Grant:	  	 
		
	 Date(s) Stock 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 ends before the date this option becomes exercisable, this option will
terminate at the same time as Employee’s employment terminates. 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: _____________	 	 	 	 
	 	 	 	 	 	 	 Paul S. Pressler

	 	 	 	 	 	 	 President and Chief Executive Officer

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

				
	 Dated: _____________
	 	 	 	 Signature:
	 	 
					
	 	 	 	 	 	 	 Address:
	 	 
					
	 	 	 	 	 	 	 	 	 
					
	 	 	 	 	 	 	 	 	 


									
					
	 	 	 	 	 	 	 Social Security No.:
	 	 










 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 with the Company or an Affiliate through such date(s). If Employee is not employed 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 with 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 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 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., 2 Folsom, 13th 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. 
  
 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.