THE GAP, INC.
EXECUTIVE CAPITAL ACCUMULATION PLAN
THE GAP, INC. (the "Company") hereby establishes The Gap, Inc.
Executive Capital Accumulation Plan, effective April 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 "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.
1.4 "Committee" shall mean the Retirement Committee appointed
pursuant to GapShare, the qualified profit sharing plan maintained
by the Company.
1.5 "Company" shall mean The Gap, Inc.
1.6 "Deferral Contributions" shall mean the amounts credited
to Participants' Accounts under the Plan pursuant to their deferral
elections made in accordance with Section 2.2.
1.7 "Eligible Employee" shall mean an Employee of an Employer
who is employed at the level of "executive vice president" or
higher and who has a Salary greater than 300% 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
the first Plan Year shall be determined as of February 1, 1994. An
Employee's eligibility for any following 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 (other than the first
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.
1.8 "Employee" shall mean an individual who is employed by one
of the Employers as a common-law employee.
1.9 "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.
1.10 "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.
1.11 "Participant" shall mean an Eligible Employee who has
become a Participant in the Plan pursuant to Section 2.2 and has
not ceased to be a Participant pursuant to Section 2.3.
1.12 "Participant's Account" or "Account" means as to any
Participant the separate account maintained on the books of the
Company in order to reflect the Deferral Contributions made by the
Participant, and the earnings relating thereto. To the extent
necessary to reflect a Participant's distribution elections, a
separate Account may be maintained with respect to the amounts
credited to the Participant's Account for any Plan Year.
1.13 "Plan" shall mean The Gap, Inc. Executive Capital
Accumulation Plan, as set forth in this instrument and as hereafter
amended from time to time.
1.14 "Salary" shall mean a Participant's basic yearly salary,
excluding bonuses and taxable and nontaxable fringe benefits and
excluding deferral contributions under The Gap, Inc. Executive
Deferred Compensation Plan; provided, however, that Salary shall
include 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.
1.15 "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 Deferral Elections. For the first Plan Year beginning
April 1, 1994, an Eligible Employee may elect to make Deferral
Contributions no later than March 31, 1994 with respect to Salary
paid on and after April 1 of that Plan Year. For following Plan
Years, an election to make 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 2.2.2. An
Eligible Employee may elect to make 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 Deferral Contributions with respect to Salary paid on and
after July 1 of that Plan Year.
2.2.2 Election to Suspend Contributions. A Participant may
elect, during a Plan Year for which he or she has elected 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 Deferral
Contributions during that Plan Year.
2.2.3 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 50% of his or her Salary 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 Deferral Contributions shall be effective only with respect
to payments of Salary after such date. For the first Plan Year
beginning April 1, 1994, Deferral Contributions shall be effective
only with respect to payments of Salary on or after April 1, 1994.
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 Committee shall specify a "Deemed Earnings Rate,"
which shall, at a minimum, be equal to the rate of return during
that Plan Year on a mutual fund indexed to the S&P 500, and
specified by the Committee before the beginning of each Plan Year.
In no event shall the Deemed Earning Rate be less than 0%. 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 Deferral Account to which shall be credited all
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 Deferral
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 Deferral Account. Distribution of a Participant's
Deferral Account shall be made only after his or her Termination
Date. Except as provided in Section 5.2, 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 Deferral Account shall be determined as of the
last day of the month following the Termination Date.
5.2 Installment Distributions. A Participant may elect to
receive payments from his or her Account that are made after his or
her Termination Date in annual installments for 5, 10 or 15 years.
5.2.1 Installment Elections. A Participant's election of
installment distributions must be made at the time of his or her
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 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.
5.2.2 Installment Payments. The first installment payment
shall be made as soon as practicable following the Participant's
Termination 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.
5.3 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.
5.4 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.
5.5 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.
5.6 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.
5.7 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;
(k) 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.