Document:

Form of Stock Option Plan Terms and Conditions

 EXHIBIT 10.40 
  
 BAXTER INTERNATIONAL INC. 
 Form of Stock Option Plan Terms and Conditions 
  

	1.	Purpose 

  
 This Stock Option Plan (the “Plan”) is adopted by the Compensation Committee of the Board of Directors (the “Committee”) of Baxter International Inc. 
  

	2.	Participants 

  
 Participants in this Plan (a “Participant”) shall be employees of Baxter International Inc. or its subsidiaries (“Company”) who have been selected by the Committee and to whom the Committee makes
an award of an option (an “Option”) under this Plan. 
  

	3.	Awards 

  
 Each Option shall be granted pursuant to and for the purposes stated in the [BAXTER INTERNATIONAL INC. INCENTIVE PROGRAM] (each a “Program”), as specified by the Committee on the Grant Date. Each option
shall be granted as of [DATE] (the “Grant Date”). The purchase price for each share of Common Stock subject to an Option shall be the Fair Market Value of a share of Common Stock on the Grant Date; provided, however, for employees of the
Company’s subsidiaries in Italy the purchase price will be the greater of the “Normal Value” or the “Fair Market Value” on the date of grant. The “Normal Value” is defined as the arithmetic average of the share
price of Common Stock in the month preceding the Grant Date. The terms of each Option will be as set forth in these terms and conditions. To the extent that any of the terms and conditions contained in this Plan are inconsistent with the terms of
the applicable Program, the terms of the applicable Program shall control. Terms defined in the applicable Program shall have the same meaning in these terms and conditions. The Option is not intended to qualify as an Incentive Stock Option within
the meaning of section 422 of the United States Internal Revenue Code. The Company has not selected any country as its home member state under the European Union Directive 2003/71/EC, and the grant of Options pursuant to this Plan is simultaneous.

  

	4.	Vesting, Exercise and Expiration 

  

	4.1	Subject to Section 11.10 of the applicable Program, Options shall first become exercisable on the third anniversary of the Grant Date. After an Option becomes exercisable and
until it expires, it may be exercised in whole or in part, in the manner specified by the Company. Under no circumstances may an Option be exercised after it has expired. Shares of Common Stock may be used to pay the purchase price for shares of
Common Stock to be acquired upon exercise of an Option or fulfill any tax withholding obligation, subject to any requirements or restrictions specified by the Company. 

  

	4.2	Except as otherwise set forth in Sections 4.3 and 4.4 and the following sentence, if a Participant’s employment with the Company terminates before his or her

	 	 
Option becomes exercisable, the Option will expire when the Participant’s employment with the Company terminates. If a Participant is rehired by the
Company within 90 days of termination, the Participant shall be construed to have been continuously employed by the Company for purposes of vesting and exercise. 

  

	4.3	If the employment with the Company of a Participant who is at least 50 years of age and has completed 15 or more years of employment with the Company is terminated (other
than by reason of his or her death or disability) before his or her Option becomes exercisable, the Option will continue to become exercisable for one year from the date on which employment with the Company is terminated. Subject to Section 4.8, the
Option will expire on the fifth anniversary of the termination date. 

  

	4.4	If the employment with the Company of a Participant is terminated due to death or disability more than one year after the date on which the Option is granted before his or
her Option becomes exercisable, the Option will immediately become exercisable and, subject to Section 4.8, the Option will expire on the first anniversary of the date that it becomes exercisable. 

  

	4.5	Except as otherwise set forth in Section 4.6 and 4.7, if a Participant’s employment with the Company terminates after his or her Option becomes exercisable, the Option
will not expire immediately but will remain exercisable. Subject to Section 4.8, the Option will expire three months after the Participant’s employment with the Company terminates. If the participant dies or becomes disabled during the
three-month period, the option will expire on the first anniversary of the termination date. 

  

	4.6	If the employment with the Company of a Participant who is at least 50 years of age and has completed 15 or more years of employment with the Company is terminated (other
than by reason of his or her death or disability) after his or her Option becomes exercisable, the Option will not expire immediately but will remain exercisable. Subject to Section 4.8 and the following sentence, the Option will expire on the fifth
anniversary of the termination date. 

  

	4.7	If the employment with the Company of a Participant is terminated due to death or disability after his or her Option becomes exercisable, the Option will not expire
immediately but will remain exercisable. Subject to Section 4.8, the Option will expire on the first anniversary of the date of death or disability of the Participant. 

  

	4.8	Options that have not previously expired will expire at the close of business on the tenth anniversary of the Grant Date; provided, however, Options granted to employees
residing in Switzerland on the date of grant shall expire on the eleventh anniversary of the Grant Date. If an Option would expire on a date that is not a business day, it will expire at the close of business on the last business day preceding that
date. A business day is any day on which the Common Stock is traded on the New York Stock Exchange. 

  

	4.9	An exercisable Option may only be exercised by the Participant, his or her legal representative, or a person to whom the Participant’s rights in the Option are
transferred by will or the laws of descent and distribution. 

  
 2 

	4.10	A transfer of employment among Baxter and its subsidiaries will not constitute a termination of employment within the meaning of the Plan. 

  

	4.11	A transfer of employment to a company that assumes an Option or issues a substitute option in a transaction to which Section 424 of the United States Internal Revenue Code
applies will not constitute a termination of employment within the meaning of the Plan. 

  

	4.12	The Committee may, in its sole discretion and without receiving permission from any Participant, substitute stock appreciation rights (“SARs”) for any or all
outstanding Options. Upon the grant of substitute SARs, the related Options replaced by the substitute SARs shall be cancelled. The grant price of the substitute SAR shall be equal to the Option Price of the related Option, the term of the
substitute SAR shall not exceed the term of the related Option, and the terms and conditions applicable to the substitute SAR shall otherwise be substantially the same as those applicable to the related Option replaced by the substitute SAR.

  

	5.	Amendment 

  
 Subject to the limitations contained in Section 11.9 of the Program, the Board or the Committee may, at any time and in any manner, amend, suspend, or terminate the Plan or any Option outstanding under the Plan.

  
 3Letter of Credit Agreement Bank of America, N.A., as LC Issuer

 Exhibit 10.1 
  
 EXECUTION COPY 
  
 AMENDMENT NO. 2 TO THE 
 LETTER OF
CREDIT AGREEMENT 
  
 Dated as of October 29,
2004             
  
 AMENDMENT NO. 2 TO THE LETTER OF CREDIT AGREEMENT (this “Amendment”) among The Gap, Inc., a Delaware corporation (the “Company”), the LC Subsidiaries (as defined in the
Existing LC Facility referred to below) and Bank of America, N.A. (the “LC Issuer”). 
  
 PRELIMINARY STATEMENTS: 
  
 (1) The Company, the LC Subsidiaries, and the LC Issuer entered into a Letter of Credit Agreement dated as of June 25, 2003, as amended as of August 30,
2004, (the “Existing LC Facility”), and the Company and the LC Subsidiaries also entered into separate letter of credit agreements each dated June 25, 2003, as amended as of August 30, 2004, with HSBC Bank USA, National Association,
JPMorgan Chase Bank and Citibank, N.A., respectively, as issuing bank, the material terms of which are no more favorable to each such issuing bank than the terms of the Existing LC Facility (as such agreements may be replaced, amended, supplemented
or otherwise modified from time to time, the “Other Letter of Credit Facilities”). Capitalized terms not otherwise defined in this Amendment have the same meanings as specified in the Existing LC Facility. 
  
 (2) On or around the date hereof, the Company and the LC Subsidiaries are to
enter into amendments to the Other Letter of Credit Facilities (the “LC Facility Amendments”). 
  
 (3) The Company, the LC Subsidiaries and the LC Issuer desire to enter into this Amendment to the Existing LC Facility on the amended terms as set forth
below. 
  
 SECTION 1. Amendments to Letter of Credit
Agreement. The Existing LC Facility is, effective as of the date hereof and subject to the satisfaction of the conditions precedent set forth in Section 3, hereby amended as follows: 
  
 (a) Amendments to Subsection 1.01. Subsection 1.01 of
the Existing LC Facility is hereby amended as follows: 
  
 (i) The term “Required Collateral Amount” is hereby amended by deleting the text thereof in its entirety and inserting in lieu thereof the following: 
  
 “Required Collateral Amount” means 100
percent of the Facility Amount from time to time, provided, that the Required Collateral Amount shall be increased to 105 percent of the Facility Amount during any period (and only for such time) that the Company’s long-term senior
unsecured non-credit-enhanced debt rating by either S&P or Moody’s is less than the Effective Date Rating by such rating agency, respectively, provided, further, that to the extent that the collateral under the Collateral
Documents in 

 respect of any EURO-denominated Letters of Credit consists of U.S. Dollar denominated investments or U.S.
Dollars, the Required Collateral Amount in respect of such Letters of Credit shall be 110 percent of the aggregate face amount of such Letters of Credit. 
  
 SECTION 2. LC Facility Amendments. LC Issuer has received a copy of and reviewed each of the LC Facility Amendments and hereby consents to the
terms of each of the LC Facility Amendments. 
  
 SECTION 3.
Conditions of Effectiveness. This Amendment shall become effective on and as of the first date on which the following conditions precedent have been satisfied: 
  
 (a) The LC Issuer shall have received all of the following documents, in form and substance satisfactory to the LC Issuer:

  
 (i) Counterparts of this Amendment executed
by each Account Party. 
  
 (ii) Certified copies
of the resolutions of the board of directors (or persons performing similar functions) of each domestic Account Party approving this Amendment and the matters contemplated hereby. 
  
 (iii) A certificate of the Secretary or an Assistant Secretary of each domestic Account Party certifying the
names and true signatures of the officers of such Account Party authorized to sign this Amendment. 
  
 (b) Evidence that each of the LC Facility Amendments has been entered into and all conditions precedent to the effectiveness of each of the LC Facility
Amendments (except the entry into and effectiveness of this Amendment) have been satisfied or waived. 
  
 (c) Such other documents as the LC Issuer may reasonably request. 
  

The effectiveness of this Amendment is conditioned upon the accuracy of the factual matters described herein. This Amendment is subject to the
provisions of Section 8.01 of the Existing LC Facility. 
  
 SECTION 4. Representations and Warranties of the Company. The Company represents and warrants as follows: 
  
 (a) Each Account Party is duly organized or formed, validly existing and in good standing under the laws of its jurisdiction of
incorporation or organization. 
  
 (b) The
execution, delivery and performance by each Account Party of this Amendment are within such Account Party’s respective powers (corporate or otherwise), have been duly authorized by all necessary action (corporate or otherwise), and do not (i)
contravene such Account Party’s Constitutive Documents, (ii) violate any Requirements of Law, (iii) conflict with or result in the breach of, or constitute a default or require any payment to be made under, any material contract, loan
agreement, indenture, mortgage, deed of trust, lease or other material instrument binding on or 

 affecting any Account Party or any of its properties or (iv) result in or require the creation or
imposition of any Lien upon or with respect to any of the properties of any Account Party. No Account Party is in violation of any such Requirements of Law or in breach of any such contract, loan agreement, indenture, mortgage, deed of trust, lease
or other instrument, the violation or breach of which would be reasonably likely to have a Material Adverse Effect. 
  
 (c) No authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body is
required for the due execution, delivery and performance by any Account Party of this Amendment. 
  
 (d) This Amendment has been duly executed and delivered by each Account Party. This Amendment is the legal, valid and binding obligation
of each Account Party enforceable against such Account Party in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to or affecting the enforcement of creditors’ rights generally
and general principles of equity (regardless of whether considered in a proceeding in equity or at law). 
  
 SECTION 5. Reference to and Effect on the Existing LC Facility . (a) On and after the effectiveness of this Amendment, each reference
in the Existing LC Facility to “this Agreement”, “hereunder”, “hereof” or words of like import referring to the Existing LC Facility, and each reference in any other LC Facility Document to “the Letter of Credit
Agreement”, “thereunder”, “thereof” or words of like import referring to the Existing LC Facility, shall mean and be a reference to the Existing LC Facility, as amended by this Amendment. 
  
 (b) Each LC Facility Document, as specifically amended by this Amendment, is
and shall continue to be in full force and effect and is hereby in all respects ratified and confirmed. Without limiting the generality of the foregoing, the Collateral Documents and all of the Collateral described therein do and shall continue to
secure the payment of all Obligations of the Account Parties under the LC Facility Documents, in each case as amended by this Amendment. 
  
 (c) The execution, delivery and effectiveness of this Amendment shall not, except as expressly provided herein, operate as a waiver of any right, power or
remedy of the LC Issuer under any LC Facility Document, nor constitute a waiver of any provision of any LC Facility Document. 
  
 SECTION 6. Costs and Expenses. The Company agrees to pay on demand all costs and expenses of the LC Issuer in connection with the
preparation, execution, delivery and administration, modification and amendment of this Amendment and the other instruments and documents to be delivered hereunder (including, without limitation, the reasonable fees and expenses of counsel for the
LC Issuer) in accordance with the terms of Section 8.04 of the Existing LC Facility. 
  
 SECTION 7. Execution in Counterparts. This Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be
deemed to be an original and all of which taken together shall 

 constitute but one and the same agreement. Delivery of an executed counterpart of a signature page to this Amendment by
telecopier shall be effective as delivery of a manually executed counterpart of this Amendment. 
  
 SECTION 8. Governing Law. This Amendment shall be governed by, and construed in accordance with, the laws of the State of New York.

  
 [Remainder of page intentionally left blank.] 

 IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their respective
officers thereunto duly authorized, as of the date first above written. 
  

					
	THE COMPANY:
		
	 	 	THE GAP, INC.
			
	 	 	By:	 	  

	 	 	Name:	 	Sabrina Simmons
	 	 	Title:	 	 Senior Vice President and Treasurer

	
	THE LC SUBSIDIARIES:
		
	 	 	BANANA REPUBLIC, LLC
			
	 	 	By:	 	  

	 	 	Name:	 	Sabrina Simmons
	 	 	Title:	 	 Senior Vice President and Treasurer

		
	 	 	GPS CONSUMER DIRECT, INC.
			
	 	 	By:	 	  

	 	 	Name:	 	Sabrina Simmons
	 	 	Title:	 	 Senior Vice President and Treasurer

		
	 	 	GAP (CANADA) INC.
			
	 	 	By:	 	  

	 	 	Name:	 	Sabrina Simmons
	 	 	Title:	 	 Senior Vice President and Treasurer

		
	 	 	GAP (FRANCE) S.A.S.
			
	 	 	By:	 	  

	 	 	Name:	 	Lisa Mertens
	 	 	Title:	 	President

					
	 	 	GAP (JAPAN) K.K.
			
	 	 	By:	 	

	 	 	Name:	 	Thomas J. Lima
	 	 	Title:	 	Director
		
	 	 	GAP (NETHERLANDS) B.V.
			
	 	 	By:	 	  

	 	 	Name:	 	Julie Kanberg
	 	 	Title:	 	Director
		
	 	 	GPS (GREAT BRITAIN) LIMITED
			
	 	 	By:	 	  

	 	 	Name:	 	Byron Pollitt
	 	 	Title:	 	Director
		
	 	 	OLD NAVY (CANADA) INC.
			
	 	 	By:	 	  

	 	 	Name:	 	Sabrina Simmons
	 	 	Title:	 	Senior Vice President and Treasurer

					
	THE LC ISSUER:
		
	 	 	BANK OF AMERICA, N.A.
			
	 	 	By:	 	  

	 	 	Name:	 	 
	 	 	Title:

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