Employment Agreement with Art Peck – Gap Inc.

January 31, 2011

Art Peck

Dear Art,

Congratulations on your new position with the company!

This letter is to confirm your compensation arrangements as President, Gap
North America Division. In this position you will report to Glenn Murphy,
Chairman and CEO, Gap Inc.

Salary. Your annual salary will be $850,000, payable every
two weeks.

Start Date. Your first day in your new position will be
February 2, 2011.

Annual Bonus. Based on your position as Division President,
you will be eligible for an annual bonus based on achievement of Gap Inc. and/or
Division financial objectives as well as key business goal and individual
performance. Under the current program, your annual target bonus will be 75% of
your base salary. Depending on results, your actual bonus, if any, may be higher
or lower and can reach a maximum of 150%. Bonus payments will be prorated based
on active time in position, divisional or country assignment and changes in base
salary or incentive target that may occur during the fiscal year. Your annual
bonus for fiscal 2011 is scheduled for payment in March 2012. You must be
employed by Gap Inc. on the payment date to receive an award. Gap Inc. has the
right to modify the program at any time. Management discretion can be used to
modify the final award amount. Bonus payments are subject to supplemental income
tax withholding.

Long-Term Incentive Awards. You will continue to participate
in the Long-Term Growth Program and may be eligible for future Long-Term
Incentive Awards as a participant in the Focal Review process.

Termination/Severance. The provisions in the Amendment to
Agreement you signed on December 15, 2008 regarding certain compensation and
benefits upon termination continue to apply.

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Art Peck

January 31, 2011

Page Two

Abide by Gap Inc. Policies/Protection of Gap Inc.
Information. You agree to abide by all Gap Inc. policies including, but
not limited to, policies contained in the Code of Business Conduct. You also
agree to abide by the Confidentiality and Non-Solicitation terms below during
and after your employment with Gap Inc.

Insider Trading Policies. Based on the level of your
position, you will be subject to Gap Inc.153s Securities Law Compliance Manual,
which among other things places restrictions on your ability to buy and sell Gap
Inc. stock and requires you to pre-clear trades, and comply with Section 16 of
the Securities Exchange Act of 1934, as amended. If you do not already have a
copy of the compliance manual, or have questions about it, you should contact
Gap Inc. Stock Administration, at (415) 427-2481.

Confidentiality. You acknowledge that you will be in a
relationship of confidence and trust with Gap Inc. As a result, during your
employment with Gap Inc., you will acquire “Confidential Information,” which is
information (whether in electronic or any other format) that people outside Gap
Inc. never see, such as unannounced product information or designs, business or
strategic plans, financial information and organizational charts, and other
materials.

You agree that you will keep the Confidential Information in strictest
confidence and trust. You will not, without the prior written consent of Gap
Inc.153s General Counsel, directly or indirectly use or disclose to any person or
entity any Confidential Information, during or after your employment, except as
is necessary in the ordinary course of performing your duties while employed by
Gap Inc., or if required to be disclosed by order of a court of competent
jurisdiction, administrative agency or governmental body, or by subpoena,
summons or other legal process, provided that prior to such disclosure, Gap Inc.
is given reasonable advance notice of such order and an opportunity to object to
such disclosure.

You agree that in the event your employment terminates for any reason, you
will immediately deliver to Gap Inc. all company property, including all
documents, materials or property of any description, or any reproduction of such
materials, containing or pertaining to any Confidential Information.

Non-Solicitation of Employees. In order to protect
Confidential Information, you agree that so long as you are employed by Gap
Inc., and for a period of one year thereafter, you will not directly or
indirectly, on behalf of yourself, any other person or entity, solicit, call
upon, recruit, or attempt to solicit any of Gap Inc.153s employees or in any way
encourage any Gap Inc. employee to leave their employment with Gap Inc. You
further agree that you will not directly or indirectly, on behalf of yourself,
any other person or entity, interfere or attempt to interfere with Gap Inc.153s
relationship with any person who at any time was an employee, consultant,
customer or vendor or otherwise has or had a business relationship with Gap Inc.

Non-disparagement. You agree now, and after your employment
with the Gap Inc. terminates not to, directly or indirectly, disparage Gap Inc.
in any way or to make negative,

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Art Peck

January 31, 2011

Page Three

derogatory or untrue statements about Gap Inc., its business activities, or
any of its directors, managers, officers, employees, affiliates, agents or
representatives to any person or entity.

Employment Status. You understand that your employment is
still “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, Gap Inc. is free to terminate
your employment at any time for any reason. The only way your at-will status can
be changed is if you enter into an express written contract with Gap Inc. that
contains the words “this is an express contract of employment” and is signed by
an officer of Gap Inc.

In the event that there is any dispute over the terms, enforcement or
obligations in this letter, the prevailing party shall be entitled to recover
from the other party reasonable attorney fees and costs incurred to enforce any
agreements.

Please note that except for those agreements or plans referenced in this
letter, this letter contains the entire understanding of the parties and
supersedes any other agreements, representations or understandings (whether oral
or written and whether express or implied) with respect to this offer. Please
review and sign this letter and return it to Eva Sage-Gavin at Gap Inc. You may
keep one original for your personal records.

Art, congratulations on this latest achievement in your career at Gap Inc.

Yours sincerely,

/s/ Glenn Murphy

Glenn Murphy

Chairman and CEO, Gap Inc.

Confirmed this 29th day of January, 2011

/s/ Art Peck

Art Peck