Income Continuation Protection Agreement - The Gap Inc. and John B. Wilson


Gap Inc.                                            One Harrison Street
     Gap                                            San Francisco, CA  94105
     Banana Republic                                650 952-4400 tel
     Old Navy



John B. Wilson                                                December 21, 1998
[address omitted] 

     Re:  Income Continuation Protection

Dear John,

     You have recently expressed your desire for financial protection in the
event that The Gap, Inc. ('the Company') decides to significantly decrease your
current level of responsibilities ('Company's Decision').  This letter
summarizes our agreement regarding what the Company will provide for you in that
event.

     I.  In exchange for your delivery of the documents described in paragraph
II below, the Company will provide you with the following:

     A.  Continued employment for two years ('Continued Employment').  The
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Company will provide you with Continued Employment for two years; except, of
course, your Continued Employment will end if you accept a position with another
company.  During the period of Continued Employment, you will remain an employee
of the Company and, as such, will not be permitted to be associated with, or
employed by, any other business without the written consent of the CEO or
Chairman of the Company.  Your duty, as an employee, to maintain the Company's
trade secrets and confidential information and not to engage in any act
inconsistent with an employee's duty of loyalty shall continue during this
period of Continued Employment.  At the end of Continued Employment, you and the
Company can negotiate a new agreement that is acceptable to both parties.

     B.  Salary and benefits continued during Continued Employment.  Your  last
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base salary in effect at the time of the Company's Decision will continue to be
paid every two weeks during the period of Continued Employment.  You will not be
eligible to receive salary increases during Continued Employment.

         During the period of Continued Employment, you will be eligible to
participate in whatever medical plans, long-term disability plans, and life
insurance plans the Company is currently offering.  However, you will not be
eligible to receive a car allowance.

     C.  Additional benefits provided during the period of Continued Employment.
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         1.    Management Incentive Cost Award Plan ('MICAP').  If you are still
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an employee at the time MICAP bonuses are actually paid out, then for each
fiscal year (or portion thereof) occurring after the Company's Decision, you
will receive a MICAP bonus equal to the average bonus given, during that fiscal
year, to executives of the same grade level you held at the
 
Letter to John B. Wilson
December 21, 1998
Page 2

time of the Company's Decision. For partial fiscal years, you will receive a 
pro-rated bonus. You will not be eligible to receive any other bonuses during
the period of Continued Employment.

         2.    Executive Long-Term Cash Award Performance Plan ('ELCAPP').  As
               --------------------------------------------------------
indicated below in paragraph II, all rights to ELCAPP will cease at the time of
the Company's Decision. However, if you are still employed at the time ELCAPP
bonuses are actually paid out, then you will receive an ELCAPP payment (pro-
rated for the number of months during the ELCAPP cycle that you were an employee
prior to the Company's Decision) if: (i) you had participated in the ELCAPP
cycle for at least 12 months (i.e., one year of three) before the date of the
Company's Decision; and (ii) ELCAPP payments were made for that particular
ELCAPP cycle according to the terms of ELCAPP. You will not be eligible to
participate in any ELCAPP cycles which begin after the date of the Company's
Decision.

         3.    Stock Options.  As long as you are still employed on the vesting
               -------------
date, you will vest in 50% of the options (discounted or otherwise) that vest
during your period of Continued Employment. The other 50% will be amended as
noted in paragraphs I.D. and II.C. below. All stock grants with vesting dates
beyond 24 months (or after 'Second Anniversary') of the Company's Decision will
be canceled. You will not be eligible to receive any other stock grants during
the period of Continued Employment.

     D.    Additional benefits if you are still an employee on the Second
           --------------------------------------------------------------
Anniversary of the Company's Decision.  If you are still an employee on the
-------------------------------------                                      
Second Anniversary of the Company's Decision, then you will receive these
additional benefits on the Second Anniversary of the Company's Decision:

           1.  Stock Options.   As indicated above in paragraph I.C.3., 50% of
               -------------
your options (discounted or otherwise) that would have vested during the period
of Continued Employment will be amended at the time of the Company's Decision to
provide for a vesting date on the Second Anniversary of the Company's Decision.
All stock grants with vesting dates beyond the Second Anniversary of the
Company's Decision will be canceled. You will not be eligible to receive any
other stock grants during the period of Continued Employment.

     II.  In exchange for the above, you agree to provide the Company with the
following documents at the time of the Company's Decision:

      A.  Resignation of officer status.  You will submit a written resignation
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from your position as a Company officer.

      B.  Legal release.  You will sign a legal release of all claims, in a form
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acceptable to the Company, in its sole discretion, which will also include a
confidentiality provision and a non-disparagement clause.

      C.  Amended stock grants.    You will sign a document canceling all stock
         ---------------------                                                
options which have a vesting date more than 24 months from the date of the
Company's Decision.  Fifty percent of each grant which will vest within 24
months of the Company's Decision will be amended so that the vesting date for
50% of the shares is changed to be the date of the Second Anniversary of the
Company's Decision.
 
Letter to John B. Wilson
December 21, 1998
Page 3

      D.  Amended ELCAPP.  You will sign a consent to cancel further
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participation in the ELCAPP plan and amend your existing right to participate in
the plan to reflect the partial participation described in Paragraph I.C.2.
above.

     III. Miscellaneous

     In the event you become disabled during Continued Employment, your base
salary will be continued uninterrupted for the entire period of Continued
Employment, but will be offset by any amount you receive from the Company's
disability insurance carrier or a government disability program.  In the event
of disability during the period of Continued Employment you will be allowed to
vest in stock provided to you under this agreement for the duration of any
Company-provided medical leaves of absence ('MLOA') for which you qualify.  If
your disability exceeds the maximum allowable time for a MLOA, then any stock
which would have vested after the end of the MLOA but during this period of
Continued Employment will be canceled.

     In the event you were to die during the period of Continued Employment,
then all stock options (discounted or otherwise) that would have been provided
to you during the period of Continued Employment will be immediately accelerated
and provided to your estate.  Your estate will not have any right to future
salary or bonuses (MICAP or ELCAPP) under this agreement.

     By signing this agreement you agree that no promises or representations
have been made to you which do not appear in this letter agreement, and that
this letter contains the entire agreement between us and that you are not
relying on any representations or promises that do not appear in this letter.

     John, you have contributed greatly to our organization and I trust that we
will have many more years of shared success.


                              Very truly yours,

                              /s/ Millard Drexler

                              Millard S. Drexler
                              President and Chief Executive Officer
                              The Gap, Inc.



Agreed to this 29 day of December, 1998


/s/ John B. Wilson
-------------------------
John B. Wilson