THE GAP, INC. EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION AWARD PLAN

Exhibit 10.1

THE GAP, INC.

EXECUTIVE MANAGEMENT INCENTIVE COMPENSATION AWARD PLAN

(January 25, 2005 Amendment and Restatement)

The purpose of the Executive Management Incentive Compensation Award Plan (the “Plan”) is to provide financial incentives for certain of the Company’s Officers to meet and exceed the Company’s annual financial and/or operational goals. Awards under the Plan are intended to qualify as “performance-based compensation” under Section 162(m) of the Code.

2.1 “Affiliated Company” means any company controlling, controlled by, or under common control with the Company.

2.2 “Award” means an award pursuant to the provisions of the Plan.

2.3 “Base Salary” means, as to a Performance Period, a Participant’s average actual annual salary rate during the Performance Period, based on the number of days at each actual salary rate. Such salary shall be before (1) deductions for taxes and benefits, and (2) deferrals of compensation pursuant to Company-sponsored plans.

2.4 “Board of Directors” means the board of directors of the Company.

2.5 “Capital Charge Rate” means the current long-term approximation of the Company’s weighted average cost of capital (WACC), which represents the weighted average of the Company’s cost of debt and the cost of equity. The weighting is determined by comparing the balance of the Company’s debt (acquired debt plus capitalized leases) to the balance of the Company’s equity based upon market value (rather than book value).

2.6 “Code” means 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 or regulation amending, supplementing or superseding such section or regulation.

2.7 “Committee” means the Compensation and Management Development Committee of the Board of Directors, or any other Committee appointed by the Board of Directors pursuant to Section 3 of the Plan.

2.8 “Company” means The Gap, Inc., a Delaware corporation.

2.9 “Comparable Store Sales Growth” means the Company’s or a division’s same store net sales growth for the Performance Period in excess of the prior year.

2.10 “Determination Date” means, as to a Performance Period, the latest date possible which will not jeopardize the Plan’s qualification as “performance-based compensation” under Section 162(m) of the Code.

2.11 “Earnings” shall mean income before or after interest, taxes, depreciation, amortization and/or selected expenses allocated among divisions as determined by the Committee.

2.12 “Earnings Per Share” means as to any Performance Period, the fully diluted earnings per share amount or percentage growth of such amount.

2.13 “Economic Profit” shall mean Net Operating Profit After Tax (NOPAT) for a given Performance Period less Capital Charges. Total Company or divisional NOPAT shall mean Earnings plus interest on Lease Investment less income taxes. Capital Charges means the Company’s or a division’s Capital Balances multiplied by the Capital Charge Rate. Divisional Capital Balances include certain division specific assets and liabilities, the present value of operating leases, and also may include an allocation for shared assets and shared liabilities. Total Company Capital Balances may include an aggregation of divisional capital balances in addition to certain shared assets and liabilities and the present value of operating leases.

2.14 “Fiscal Year” means any fiscal year of the Company.

2.15 “Gross Margin” means sales minus cost of goods sold including rent occupancy and depreciation.

2.16 “Inventory Performance” means inventory levels or inventory turn.

2.17 “Lease Investment” means the present value of minimum expected lease payments.

2.18 “MICAP Free Cash Flow” means the Company’s or a division’s Net Earnings for a given Performance Period adjusted for Non-Cash Charges and changes in certain balance sheet accounts, which may result in an increase and/or a decrease to Net Earnings. Non-Cash Charges may include, but are not limited to, depreciation and amortization. Divisional balance sheet changes may include activities in certain division specific operating assets and liabilities, and may also include an allocation for shared assets and shared liabilities. Total Company balance sheet changes may include an aggregation of divisional balance sheet changes in addition to changes in certain shared assets and liabilities.

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2.19 “Net Earnings” means the Earnings for a given Performance Period less certain allocated or shared expenses (e.g., headquarters, distribution centers, etc.), as determined by the Committee, after interest and taxes.

2.20 “Officer” means an officer (whether or not a member of the Board of Directors) employed by the Company or any Affiliated Company.

2.21 “Operating Margin” means earnings before interest and taxes divided by sales.

2.22 “Participant” means as to any Performance Period, an Officer who has been selected by the Committee for participation in the Plan for such Performance Period.

2.23 “Performance Goals” means an objective goal or goals established by the Committee (in its sole discretion) for a Performance Period against which a Participant’s actual performance will be measured.

2.24 “Performance Period” means any Fiscal Year of the Company or any portion thereof as determined by the Committee with respect to which an Award may be granted.

2.25 “Return on Equity” means the Company’s or a division’s Earnings for the Performance Period expressed as a percentage of the Company’s or a division’s average shareholders’ equity over the Performance Period.

2.26 “Return on Net Assets” means Earnings for the Performance Period expressed as a percentage of the average balance of selected assets over the Performance Period.

2.27 “Sales Volume” means the total sales volume per store of the Company or one of its divisions for the Performance Period.

2.28 “Termination of Employment” means the time when the employee-employer relationship between the Participant and the Company and its Affiliated Companies is terminated for any reason, including, but not limited to, a termination by resignation, discharge, death, permanent disability, retirement, or the disaffiliation of an Affiliated Company, but excluding any such termination where there is a simultaneous reemployment by either the Company or one of its Affiliated Companies.

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2.29 “Total Sales” means the Company’s or a division’s net sales for the Performance Period.

2.30 “Total Shareholder Return” means, as to any Performance Period, the change in price plus dividend yield of a share of the Company’s common stock.

3.1 The Plan shall be administered by the Committee, which shall consist of no fewer than two members of the Board of Directors, who shall be appointed and serve at the pleasure of the Board of Directors. Only members of the Board of Directors who are “outside directors” under Section 162(m) of the Code shall serve on the Committee.

3.2 Subject to the provisions of the Plan, the Committee shall have exclusive authority to select the Participants, and to determine the target Award levels, the applicable Performance Period, the times when Awards will be granted, and the Performance Goals which must be achieved prior to payment of any Awards. For each Performance Period, all actions by the Committee shall be taken by the Determination Date.

3.3 The Committee shall have all discretion and authority necessary or appropriate to administer the Plan, including, but not limited to, the power to interpret the Plan, to