Employment Agreement - The Gap Inc. and John B. Wilson


July 16, 1996

John B. Wilson
135 Benvue Street
Wellesley, Massachusetts  02181

Dear John:

We are very pleased to offer you employment at The Gap, Inc.  This offer is
contingent upon a start date on or before November 1, 1996.  Below please find a
summary of the offer.

1.   POSITION:  Chief Administrative Officer, The Gap, Inc.  Contingent upon the
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     Board of Directors' approval, this position will be subject to the rules
     and regulations of Section 16 of the 1934 Securities Exchange Act (as
     amended).

2.   REPORTING RELATIONSHIP:  You will report to me.
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3.   AREAS OF RESPONSIBILITY:  The following departments will report to you:
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     Finance, Internal Audit, Corporate Administration, MIS, Distribution, Real
     Estate and Store Construction, General Counsel.

4.   START DATE:  To be determined, but in no event later than your tentative
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     start date of November 1, 1996.

5.   SALARY:  Your base salary will be $550,000 per year, payable every two
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     weeks.  If you start on or before October 31, 1996 you will be eligible for
     a pro-rated base salary review in April of 1997.  If you start on November
     1, or after, your base salary will be reviewed in April of 1998 and will be
     pro-rated to include the partial year worked in fiscal year 1996.

6.   BONUS:  We are offering three different cash bonuses to you:
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     A. Signing Bonus.  On your first scheduled pay date you will receive a cash
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        bonus of $850,000 (less applicable taxes).

     B. MICAP Bonus.  Under our Management Incentive Cash Award Program (MICAP),
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        you will be eligible to receive a bonus each year with a target award of
        50% of your base salary. Depending upon the performance of The Gap, Inc.
        against its annual goals, 
 
John B. Wilson
July 16, 1996
Page 2


        your payment could range from 0 to 150% of your target. At this point,
        an individual performance factor will be applied of 85% to 125%.

        Provided that your start date is on or before November 1, 1996, your
        first bonus will be guaranteed at target and payable in April 1997
        provided that you are actively employed by The Gap, Inc. at that time.
        The amount of this bonus will be prorated for the number of months you
        worked in fiscal year 1996.

     C. Long Term Cash Bonus:  You will be eligible to participate in our
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        Executive Long Term Cash Award Performance Plan (ELCAPP), subject to
        pre-approval of the Board of Directors.  ELCAPP provides for a target
        cash incentive of 100% of your base salary every three years.  'Base
        Salary' for each three year cycle is the average of your fiscal year end
        salary  in each year of the three year cycle.  Assuming you are still
        actively employed by The Gap, Inc. at that time, you will be eligible
        for the first payout under the Plan in April 1999.  Any bonus provided
        at that time will be prorated to your Anniversary Date (as defined
        herein).  The cycles for this program are overlapping.  For example, the
        2nd cycle you would be eligible for, begins on February 1, 1997 to
        January 31, 2000 with a payout in the year 2000.  Your payout will be
        based on achievement of Company goals during that period.

7.   STOCK:   Below are three different types of stock grants that we are
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     offering to you. Keep in mind that as a Section 16 officer of the Company,
     you will be subject to the rules and regulations of Section 16 of the 1934
     Securities Exchange Act (as amended), as well as Company designated trading
     windows.  All of the stock grants described below are contingent upon the
     approval of the Compensation and Stock Option Committee of the Board of
     Directors and are subject to the terms and conditions of the Company's 1996
     Stock Option and Award Plan.

     A. Stock Options: On the date when the award is approved or on your first
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        day of employment, whichever is later (hereafter 'Anniversary Date'),
        you will receive an option to purchase 300,000 shares of stock of The
        Gap, Inc.  The exercise price for the option shall be determined by the
        market value of the stock on the Anniversary Date.  These shares will
        become 100% vested and exercisable on the Anniversary Date in the year
        shown in the schedule below, provided you are then employed 
 
John B. Wilson
July 16, 1996
Page 3


        by us. The options must be exercised within ten years from the date of
        the grant, or you will lose your right to do so.

               100,000 options in 1998
               100,000 options in 1999
               100,000 options in 2000

        These partially accelerated grants have been offered as inducement to
        join our Company and, as such, they exceed the number of shares your
        peers will receive during the same years. Beginning in the next review
        cycle, (i.e. April 1997) your grants will be consistent with our overall
        compensation scheme and, in light of this offer, you will not receive
        any more options vesting in the year 2000.

     B. Restricted Stock:  On your Anniversary Date (defined in paragraph 7A
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        above), you will receive 20,300 restricted shares of common stock of The
        Gap, Inc.  Assuming you are then employed by us, the share restrictions
        will be lifted on your Anniversary Date in 1997.

     C. Discounted Stock Option: On your Anniversary Date (defined in paragraph
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        7A above), you will receive an option to purchase 70,000 shares of stock
        of The Gap, Inc. The exercise price for the options will be 50% of the
        fair market value of the stock on the Anniversary Date.  The option
        shall become 100% vested and exercisable as shown in the schedule below
        provided you are then employed by us:

               42,000 options on February 1, 1998
               28,000 options on your Anniversary Date in 1999

       These options must be exercised within ten years from the date of the
       grant, or you will lose your right to do so.

8.   RELOCATION LOAN AND EXPENSES: You will be eligible to receive a low
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     interest relocation loan for every dollar of equity you put towards the
     purchase of a new home, up to a maximum of $550,000.  The loan will be
     interest only, at 3%, for five years, with all principal and interest due
     in five years.  More details about this benefit will be forthcoming.

     We will also pay your relocation expenses in accordance with the Company's
     relocation policy.  Your relocation packet will be forwarded directly by
     our Relocation Department.
 
John B. Wilson
July 16, 1996
Page 4


9.   CAR ALLOWANCE:  During your employment, you will be provided with a car
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     allowance of  $1100 per month.  All operating expenses (i.e. gasoline,
     insurance coverage, registration, maintenance, etc.) will be your
     responsibility.  The monthly allowance is taxable and will be added to your
     W-2 Form.

10.  PROPRIETARY INFORMATION OR TRADE SECRETS OF OTHERS:  You represent and
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     warrant to us that:  1) you do not have any other agreements or
     relationships with, or commitments to, any other person or entity that
     conflicts with accepting this offer or performing your obligations as
     outlined herein; and 2) you have returned all property and confidential
     information belonging to all prior employers; and 3) you will not disclose
     to us, or use, or persuade any other Company employee to use, any
     proprietary information or trade secrets of another person or entity.  You
     further agree to defend, indemnify and hold us harmless in the event that
     any person or entity brings a lawsuit alleging your breach of the above
     representations and warranties.

11.  TERMINATION/SEVERANCE PROTECTION:  In the event that you are involuntarily
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     terminated for any reason other than 'cause' within the first 24 months of
     employment, we will offer the following protection:

     A.   One year of severance pay at your then-effective base rate, payments
          to cease as soon as new employment is effective.

     B.   If your termination occurs before the Anniversary Date in 1997, we
          will accelerate the vesting and lapse of restrictions for your 1997
          restricted shares to the date of your termination.

     C.   If your termination occurs before February 1, 1998, we will accelerate
          the vesting of your 1998 discounted stock options to the date of your
          termination.
 
     The term 'cause' is hereby defined to include dishonesty, fraud or
     deliberate injury to the Company, any activity that creates a conflict of
     interest between you and the Company, any unlawful or criminal activity of
     a serious nature, or any willful breach or neglect of your duties.

12.  GAP'S PARTIAL  RECAPTURE OF ANY ACCELERATED STOCK:  You acknowledge that a
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     large part of this offer was designed to 
 
John B. Wilson
July 16, 1996
Page 5


     compensate you for an unvested stock option granted to you by your current
     employer (Staples) which would have vested in 1997. You agree that if you
     receive any acceleration of this stock grant ('Accelerated Stock') from
     your current employer, or its surviving corporation, either due to your
     termination or your willingness to temporarily extend your employment
     through an agreed upon date, then your pre-tax gain on this Accelerated
     Stock will be used to reduce this offer as follows. Your gain on such
     Accelerated Stock will be calculated as of the market value on the
     accelerated vesting date ('Vesting Date') and fifty-percent of such gain
     (up to a maximum of $1.15 million) will be used to reduce the value of this
     offer by first reducing the number of shares of restricted shares offered
     to you in paragraph 7B above (calculated at their market value on the
     Vesting Date) then reducing the number of discounted 1998 shares in
     paragraph 7C, then the number of discounted 1999 shares, until the
     $1,150,000 maximum is recaptured by us.


13.  BENEFITS:
     -------- 

     A.   Benefits Basics  -  Company-paid Income Protection, Life, and Vision
          coverage will be effective the day you report to work.  You will have
          31 days from your first day of employment to elect optional coverage,
          such as Medical and Dental, Core Plus Income Protection, Supplemental
          Life, AD&D, etc.  If optional coverage is elected it will take effect
          on your first day of employment.

     B.   GapShare - You will become eligible to participate in our 401(k) Plan,
          called GapShare, after one year of service.  Enrollment in the Plan
          occurs just prior to the Plan Entry Dates, January 1, April 1, July 1
          and October 1 of each year after you meet the eligibility requirement.
          Please contact our Benefits Department if you would like to roll-over
          any amounts from former plans into GapShare.

     C.   Employee Stock Purchase Plan - The company also offers an Employee
          Stock Purchase Plan which gives employees the opportunity to purchase
          shares of The Gap, Inc. stock at a discount through payroll
          deductions.  More information about the plan will be provided to you
          before the annual enrollment date of June 1st.

     D.   LifeStyle Benefits - We also offer a variety of other benefit services
          and programs about which you may be interested.  
 
John B. Wilson
July 16, 1996
Page 6

          Services include BabyLine, LifeWorks, babyGap Gift, and the Dependent
          Care Account Plan.

     Detailed information on all of the Benefits Programs will be provided to
     you on your first day of employment.  This package will also contain
     important information on enrollment deadlines.

You understand that this agreement does not constitute an employment contract
and 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.  You are free to resign at any time.  Similarly, The
Gap, Inc. is free to terminate your employment at any time for any reason.  You
understand that while personnel policies, programs and procedures may exist and
be changed from time to time, the only time your at-will status could be changed
is if you were to enter into an express written contract with The Gap, Inc.,
explicitly promising you job security, containing the words 'This is an express
contract of employment', and signed by an officer of The Gap, Inc.  The above
language contains our entire agreement about your at-will status and there are
no oral or side agreements of any kind.

Again, John, we are delighted to offer you employment at The Gap, Inc.  We know
you will contribute greatly to our organization and will find the position to be
a most challenging one.

After accepting this offer by signing below, please return one original to me.
The other is for your records.

Very truly yours,                        Accepted by,

THE GAP, INC.


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Millard S. Drexler                       John B. Wilson
President and Chief Executive Officer
                                         On                        , 1996
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