THE GAP, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
THE GAP, INC. (the "Company") hereby establishes The Gap, Inc.
Executive Deferred Compensation Plan, effective January 1, 1994, for the
benefit of a select group of management and highly compensated employees of
the Company and its participating Affiliates, in order to provide such
employees with certain deferred compensation benefits. The Plan is an
unfunded deferred compensation plan that is intended to qualify for the
exemptions provided in sections 201, 301, and 401 of ERISA.
SECTION 1
DEFINITIONS
The following words and phrases shall have the following meanings
unless a different meaning is plainly required by the context:
1.1 "Affiliate" shall mean a corporation, trade or business which is,
together with the Company, a member of a controlled group of corporations
or an affiliated service group or under common control within the meaning
of section 414(b), (c), (m) or (o) of the Code.
1.2 "Board" shall mean the Board of Directors of the Company, as from
time to time constituted.
1.3 "Bonus" shall mean an award of cash payable to an Employee in
April of any fiscal year which is contingent upon the degree of the
Employee's achievement of performance goals established by the Employer for
the preceding fiscal year.
1.4 "Code" shall mean the Internal Revenue Code of 1986, as amended.
Reference to a specific section of the Code shall include such section, any
valid regulation promulgated thereunder, and any comparable provision of
any future legislation amending, supplementing or superseding such section.
1.5 "Committee" shall mean the Retirement Committee appointed
pursuant to GapShare, the qualified profit sharing plan maintained by the
Company.
1.6 "Company" shall mean The Gap, Inc.
1.7 "Deferral Contributions" shall mean the amounts credited to
Participants' Accounts under the Plan pursuant to their deferral elections
made in accordance with Section 2.1. A Participant's Deferral
Contributions shall include his or her Bonus Deferral Contributions and
Salary Deferral Contributions, as described in Section 3.1.
1.8 "Eligible Employee" shall mean an Employee of an Employer who is
employed at the level of "director" or higher and who has a Salary greater
than 150% of the Social Security taxable wage base. Eligible Employee
shall not include any Employee who is employed in a foreign country, unless
he or she has been temporarily transferred to employment with an Employer
in a foreign country and is a citizen or resident alien of the United
States at the time of the transfer. An Employee's eligibility for any Plan
Year shall be determined as of November 1 of the preceding Plan Year, based
on the Employee's position and salary and on the taxable wage base in
effect on that date; provided, however, that in the case of an Employee who
first satisfies the conditions for being an Eligible Employee on or before
June 1 of any Plan Year, eligibility shall be determined as of that June 1.
If a Participant ceases to be an Eligible Employee, no further Deferral
Contributions shall be made to the Plan on his or her behalf unless he or
she is again determined to be an Eligible Employee, but the balance
credited to his or her Account shall continue to be credited with earnings
under the terms of the Plan, and shall be distributed to him or her at the
time and in the manner set forth in Section 5.
1.9 "Employee" shall mean an individual who is employed by one of the
Employers as a common-law employee.
1.10 "Employer" shall mean the Company and each participating
Affiliates. At such times and under such conditions as the Board may
direct, one or more other Affiliates may become participating Affiliates or
a participating Affiliate may be withdrawn from the Plan.
1.11 "ERISA" shall mean the Employee Retirement Income Security Act of
1974, as amended. Reference to a specific section of ERISA shall include
such section, any valid regulation promulgated thereunder, and any
comparable provision of any future legislation amending, supplementing or
superseding such section.
1.12 "Participant" shall mean an Eligible Employee who has become a
Participant in the Plan pursuant to Section 2.1 and has not ceased to be a
Participant pursuant to Section 2.3.
1.13 "Participant's Account" or "Account" means as to any Participant
the separate account maintained on the books of the Company in order to
reflect his or her interest under the Plan. Each Participant's Account
shall comprise one or both of the following separate subaccounts:
1.13.1 "Bonus Deferral Account" shall be the subaccount
maintained to record the Bonus Deferral Contributions made by the
Participant, and the earnings relating thereto. To the extent necessary to
reflect a Participant's distribution elections, a separate Bonus Deferral
Account may be maintained with respect to amounts credited to the
Participant's Bonus Deferral Account for any Plan Year.
1.13.2 "Salary Deferral Account" shall be the subaccount
maintained to record the Salary Deferral Contributions made by the
Participant, and the earnings relating thereto. To the extent necessary to
reflect a Participant's distribution elections, a separate Salary Deferral
Account may be maintained with respect to the amounts credited to the
Participant's Salary Deferral Account for any Plan Year.
1.14 "Plan" shall mean The Gap, Inc. Executive Deferred Compensation
Plan, as set forth in this instrument and as hereafter amended from time to
time.
1.15 "Retirement" shall mean a Participant's termination of employment
with all Employers and all Affiliates at or after age 50.
1.16 "Salary" shall mean a Participant's basic yearly salary,
excluding bonuses and taxable and nontaxable fringe benefits; provided,
however, that Salary shall include Salary Deferral Contributions and all
amounts contributed by an Employer pursuant to a salary reduction agreement
which are not includable in the Employee's gross income under sections 125,
402(a)(8),or 402(b) of the Code.
1.17 "Termination Date" shall mean a Participant's termination of
employment with all Employers and Affiliates.
SECTION 2
PARTICIPATION
2.1 Participation. Each Eligible Employee's decision to become a
Participant shall be entirely voluntary.
2.2 Elections. An Eligible Employee may elect to become a
Participant (or to reinstate active participation) in this Plan by electing
to make Deferral Contributions under the Plan.
2.2.1 Salary Deferral Elections. An Eligible Employee may
elect to make Salary Deferral Contributions for any Plan Year no later than
December 31 of the preceding Plan Year. An Employee who first is
determined to be an Eligible Employee as of June 1 of any Plan Year may
elect before June 30 of that Plan Year to make Salary Deferral
Contributions with respect to Salary paid on and after July 1 of that Plan
Year. An election to make Salary Deferral Contributions shall be effective
only for the Plan Year with respect to which the election is made, and
shall be irrevocable as to amounts deferred as of the effective date of any
suspension pursuant to Section 2.2.3.
2.2.2 Bonus Deferral Elections. An Eligible Employee may
elect to make Bonus Deferral Contributions with respect to his or her bonus
payable on April 1 of any Plan Year no later than June 30 of the preceding
Plan Year. An election to make Bonus Deferral Contributions shall be
irrevocable.
2.2.3 Election to Suspend Contributions. A Participant may
elect, during a Plan Year for which he or she has elected Salary Deferral
Contributions, to suspend such contributions for the remainder of that Plan
Year. A Participant who has elected to suspend contributions during a Plan
Year may not elect further Salary Deferral Contributions during that Plan
Year.
2.2.4 Method of Elections. All elections of Deferral
Contributions shall be made in writing at the times and in the manner
prescribed by the Committee from time to time.
2.3 Termination of Participation. An Employee who has become a
Participant shall remain a Participant until his or her entire Account
balance is distributed. However, an Employee who has become a Participant
may or may not be an active Participant, depending upon whether he or she
is an Eligible Employee and has elected to make Deferral Contributions for
such Plan Year.
SECTION 3
DEFERRAL CONTRIBUTIONS
3.1 Amount of Contributions. At the times and in the manner
prescribed in Section 2.2, each Eligible Employee may elect to defer up to
75% of his or her Salary and up to 100% of his or her Bonus for a Plan Year
and to have the amounts of such deferrals credited on the books of the
Company to his or her Account under the Plan. In the case of a an Eligible
Employee who becomes a Participant on July 1 of any Plan Year, his or her
Salary Deferral Contributions shall be effective only with respect to
payments of Salary and Bonuses after such date.
3.2 Crediting of Deferral Contributions. The amounts deferred
pursuant to Section 3.1 shall be credited to the Participant's Account as
of the last day of the month in which the amount would otherwise have been
paid to the Participant.
3.3 Deemed Investment Return. Before the beginning of each Plan
Year, the Board shall specify a "Deemed Earnings Rate," which shall, at a
minimum, be equal to the one-year U.S. Treasury bill interest rate in
effect for Treasury bills issued on October 1 of the preceding year, plus 3
percentage points. For each Plan Year, there shall be credited to each
Participant's Account an amount equal to the interest, compounded monthly,
that would have been paid had the Account been deposited in a savings
account paying interest at the Deemed Earnings Rate applicable to that Plan
Year.
SECTION 4
ACCOUNTING
4.1 Participants' Accounts. At the direction of the Committee, there
shall be established and maintained for each Participant:
(a) A Salary Deferral Account to which shall be credited all
Salary Deferral Contributions made by the Participant; and
(b) A Bonus Deferral Account to which shall be credited all
Bonus Deferral Contributions made by the Participant.
To the extent necessary to reflect a Participant's distribution elections,
the Committee may direct the establishment of a separate Salary Deferral
and/or Bonus Account with respect to amounts credited to a Participant's
Account for any Plan Year. Each Participant's Account shall also be
credited at the end of each month with deemed earnings in accordance with
Section 3.3. No funds shall be set aside or earmarked for a Participant's
Account, which shall be purely a bookkeeping device.
4.2 Accounting Methods. The accounting methods or formulae to be
used under the Plan for the purpose of maintaining the Participants'
Accounts shall be determined by the Committee and may be revised by the
Committee from time to time.
4.3 Reports. Each Participant shall be furnished with periodic
statements of his or her Account, reflecting the status of his or her
interest in the Plan, at least annually.
SECTION 5
DISTRIBUTIONS
5.1 Salary Deferral Account. Distribution of a Participant's Salary
Deferral Account shall be made only after his or her Termination Date.
Except as provided in Section 5.3, such distribution shall be made in a
lump sum as soon as practicable following that Termination Date. For
purposes of such distribution the value of the Participant's Salary
Deferral Account shall be determined as of the last day of the month
following the Termination Date.
5.2 Bonus Deferral Account. Except as provided in Section 5.3, a
Participant's Bonus Deferral Account shall be distributed in a lump sum as
soon as practicable following his or her Termination Date, unless the
Participant has elected an earlier in-service distribution date or dates
for all or a portion of such Account.
5.2.1 In-Service Distribution Election. A Participant's
election of an in-service distribution date must be made at the time of his
or her Bonus Deferral Contribution election for a Plan Year, shall apply
only to amounts deferred pursuant to that election and shall be
irrevocable. An in-service distribution date with respect to a Bonus
Deferral Contribution may not be earlier than the Plan Year following the
year in which the bonus would have been paid absent the deferral.
5.2.2 In-Service Distribution Payments. Payments made
pursuant to an in-service distribution election shall be made on or before
the last working day of April of the Plan Year in which such payment was
elected to be made. For purposes of such payment the value of the
Participant's Bonus Deferral Account shall be determined as of the December
31 preceding the date of distribution.
5.3 Retirement Installment Distributions. A Participant may elect to
receive payments from his or her Account that are made after his or her
Retirement in annual installments for 5, 10 or 15 years.
5.3.1 Installment Elections. A Participant's election of
installment distributions must be made at the time of his or her Salary
and/or Bonus Deferral Contribution election for a Plan Year and shall apply
only to amounts deferred with respect to that Plan Year. No such election
shall be effective if the Participant's Termination Date occurs before he
or she attains age 50, or if the value of the Participant's Account is less
than $5,000 as of the last day of the month following his or her
Termination Date.
5.3.2 Installment Payments. The first installment payment
shall be made as soon as practicable following the Participant's Retirement
date and succeeding payments shall be made on or before the last working
day of April in each succeeding year. In no case, however, shall a
Participant receive more than one installment payment in any calendar year.
The amount to be distributed in each installment payment shall be
determined by dividing the value of the Account as of the Valuation Date
preceding the date of each distribution by the number of installment
payments remaining to be made. The "Valuation Date" shall be: (a) for the
first installment distribution, the last day of the month immediately
preceding the distribution date; and (b) for all succeeding distributions,
the December 31 immediately preceding each distribution date.
5.4 Death Distributions. If a Participant dies before the entire
balance of his or her Account has been distributed, the remaining balance
of the Participant's Account shall be distributed to his or her beneficiary
in a lump sum as soon as practicable.
5.5 Payments to Incompetents. If any individual to whom a benefit is
payable under the Plan is a minor, or if the Committee determines that any
individual to whom a benefit is payable under the Plan is incompetent to
receive such payment or to give a valid release therefor, payment shall be
made to the guardian, committee or other representative of the estate of
such individual which has been duly appointed by a court of competent
jurisdiction. If no guardian, committee or other representative has been
appointed, payment may be made to any person as custodian for such
individual under the California Uniform Transfers to Minors Act or may be
made to or applied to or for the benefit of the minor or incompetent, the
incompetent's spouse, children or other dependents, the institution or
persons maintaining the minor or incompetent, or any of them, in such
proportions as the Committee from time to time shall determine; and the
release of the person or institution receiving the payment shall be a valid
and complete discharge of any liability of the Employers with respect to
any benefit so paid.
5.6 Beneficiary Designations. Each Participant may designate, in a
signed writing delivered to the Committee on such form as it may prescribe,
one or more beneficiaries to receive any distribution which may become
payable as the result of the Participant's death.
5.7 Undistributable Accounts. Each Participant and (in the event of
death) his or her beneficiary shall keep the Committee advised of his or
her current address. If the Committee is unable to locate the Participant
or beneficiary to whom a Participant's Account is payable under this
Section 5, the Participant's Account shall be frozen as of the date on
which distribution would have been completed in accordance with this
Section 5, and no further earnings be credited thereto. If a Participant
whose Account was frozen (or his or her beneficiary) files a claim for
distribution of the Account within 7 years after the date that it was
frozen, and if the Committee determines that such claim is valid, then the
frozen balance shall be paid by the Company in a lump sum cash payment as
soon as practicable thereafter.
5.8 Committee Discretion. Within the specific time periods described
in this Section 5, the Committee shall have sole discretion to determine
the specific timing of the payment of any Account balance under the Plan.
SECTION 6
ADMINISTRATION OF THE PLAN
6.1 Plan Administrator. The Committee is hereby designated as the
administrator of the Plan (within the meaning of section 3(16)(A) of
ERISA). The Committee shall have the authority to control and manage the
operation and administration of the Plan. Any member of the Committee may
resign at any time by notice in writing mailed or delivered to the Board,
who may remove any member of the Committee at any time and may fill any
vacancy that exists.
6.2 Actions by Committee. Each decision of a majority of the members
of the Committee then in office shall constitute the final and binding act
of the Committee. The Committee may act with or without a meeting being
called or held and shall keep minutes of all meetings held and a record of
all actions taken by written consent.
6.3 Powers of Committee. The Committee shall have all powers
necessary to supervise the administration of the Plan and to control its
operation in accordance with its terms, including, but not by way of
limitation, the following powers:
(a) To interpret the provisions of the Plan and to determine any
question arising under, or in connection with the administration or
operation of, the Plan;
(b) To determine all considerations affecting the eligibility of
any Employee to become a Participant or remain a Participant in the Plan;
(c) To cause one or more separate Accounts to be maintained for
each Participant;
(d) To cause Deferral Contributions to be credited to
Participants' Accounts;
(e) To establish and revise an accounting method or formula for
the Plan, as provided in Section 4.2;
(f) To determine the manner and form in which any distribution
is to be made under the Plan;
(g) To determine the status and rights of Participants and their
spouses, beneficiaries or estates;
(h) To employ such counsel, agents and advisers, and to obtain
such legal, clerical and other services, as it may deem necessary or
appropriate in carrying out the provisions of the Plan;
(i) To establish, from time to time, rules for the performance
of its powers and duties and for the administration of the Plan;
(j) To arrange for annual distribution to each Participant of a
statement of benefits accrued under the Plan;
(j) To publish a claims and appeal procedure satisfying the
minimum standards of section 503 of ERISA pursuant to which individuals or
estates may claim Plan benefits and appeal denials of such claims; and
(l) To delegate to any one or more of its members or to any
other person, severally or jointly, the authority to perform for and on
behalf of the Committee one or more of the functions of the Committee under
the Plan.
6.4 Decisions of Committee. All decisions of the Committee, and any
action taken by it in respect of the Plan and within the powers granted to
it under the Plan, shall be conclusive and binding on all persons.
6.5 Administrative Expenses. All expenses incurred in the
administration of the Plan by the Committee, or otherwise, including legal
fees and expenses, shall be paid and borne by the Employers.
6.6 Eligibility to Participate. No member of the Committee who is
also an Employee shall be excluded from participating in the Plan if
otherwise eligible, but he or she shall not be entitled, as a member of the
Committee, to act or pass upon any matters pertaining specifically to his
or her own Account under the Plan.
6.7 Indemnification. Each of the Employers shall, and hereby does,
indemnify and hold harmless the members of the Committee, from and against
any and all losses, claims, damages or liabilities (including attorneys'
fees and amounts paid, with the approval of the Board, in settlement of any
claim) arising out of or resulting from the implementation of a duty, act
or decision with respect to the Plan, so long as such duty, act or decision
does not involve gross negligence or willful misconduct on the part of any
such individual.
SECTION 7
FUNDING
7.1 Unfunded Plan. All amounts credited to a Participant's Account
under the Plan shall continue for all purposes to be a part of the general
assets of the Company. The interest of the Participant in his or her
Account, including his or her right to distribution thereof, shall be an
unsecured claim against the general assets of the Company. Although the
Company may choose to invest a portion of its general assets for purposes
of enabling it to make payments under the Plan, nothing contained in the
Plan shall give any Participant or beneficiary any interest in or claim
against any specific assets of the Company.
SECTION 8
MODIFICATION OR TERMINATION OF PLAN
8.1 Employers' Obligations Limited. The Plan is voluntary on the
part of the Employers, and the Employers do not guarantee to continue the
Plan. Complete discontinuance of all Deferral Contributions shall be
deemed a termination of the Plan.
8.2 Right to Amend or Terminate. The Board reserves the right to
alter, amend or terminate the Plan, or any part thereof, in such manner as
it may determine, for any reason whatsoever. Any alteration, amendment or
termination shall take effect upon the date indicated in the document
embodying such alteration, amendment or termination, provided that no such
alteration or amendment shall divest any amount already credited to a
Participant's Account under the Plan. The Company may (but shall have no
obligation to) seek a private letter ruling from the Internal Revenue
Service regarding the tax consequences of participation in the Plan. If
such private letter ruling is sought, the Committee shall have the right to
adopt such amendments to the Plan (whether retroactive or prospective) that
the Internal Revenue Service may require as a condition to the issuance of
such ruling.
8.3 Effect of Termination. If the Plan is terminated, the balances
credited to the Accounts of the affected Participants shall be distributed
to them at the time and in the manner set forth in Section 5; provided,
however, that the Committee, in its sole discretion, may authorize
accelerated distribution of Participants' Accounts as of any earlier date.
SECTION 9
GENERAL PROVISIONS
9.1 Inalienability. In no event may either a Participant, a former
Participant or his or her spouse or estate sell, transfer, anticipate,
assign, hypothecate, or otherwise dispose of any right or interest under
the Plan; and such rights and interests shall not at any time be subject to
the claims of creditors nor be liable to attachment, execution or other
legal process.
9.2 Rights and Duties. Neither the Employers nor the Committee shall
be subject to any liability or duty under the Plan except as expressly
provided in the Plan, or for any action taken, omitted or suffered in good
faith.
9.3 No Enlargement of Employment Rights. Neither the establishment
or maintenance of the Plan, the making of any Deferral Contributions nor
any action of any Employer or the Committee, shall be held or construed to
confer upon any individual any right to be continued as an Employee nor,
upon dismissal, any right or interest in any specific assets of the
Employers other than as provided in the Plan. Each Employer expressly
reserves the right to discharge any Employee at any time.
9.4 Apportionment of Costs and Duties. All acts required of the
Employers under the Plan may be performed by the Company for itself and its
Affiliates, and the costs of the Plan may be equitably apportioned by the
Committee among the Company and the other Employers. Whenever an Employer
is permitted or required under the terms of the Plan to do or perform any
act, matter or thing, it shall be done and performed by any officer or
employee of the Employer who is thereunto duly authorized by the board of
directors of the Employer.
9.5 Applicable Law. The provisions of the Plan shall be construed,
administered and enforced in accordance with the laws of the State of
California.
9.6 Severability. If any provision of the Plan is held invalid and
unenforceable, its invalidity or unenforceability shall not affect any
other provision of the Plan, and the Plan shall be construed and enforced
as if such provision had not been included.
9.7 Captions. The captions contained in and the table of contents
prefixed to the Plan are inserted only as a matter of convenience and for
reference and in no way define, limit, enlarge or describe the scope or
intent of the Plan nor in any way shall affect the construction of any
provision of the Plan.
EXECUTION
IN WITNESS WHEREOF, the Company, by its duly authorized officer, has
executed this Plan on the date indicated below.
THE GAP, INC.
(seal)
Dated: NOVEMBER 5, 1993 By: \s\ Sheila Peters
Title: Senior Director Human Resources