The Gap 2010 Annual Report Download - page 66

Stock options generally expire 10 years from the grant date, three months after employee termination, or one year
after the date of an employee’s retirement or death, if earlier. Stock options generally vest over a four year period,
with shares becoming exercisable in equal annual installments of 25 percent. Stock Units generally vest over a
period of three to four years in equal annual installments.
Beginning in the second quarter of fiscal 2009, all shares related to stock options and other stock awards are
issued from treasury stock.
Stock Option and Other Stock Award Modification
In February 2007, the Committee approved the modification of certain stock options and other stock awards held
by designated employees such that at the time of an involuntary termination without cause, any outstanding,
unvested time-based options or other stock awards scheduled to vest within a defined time frame would be
accelerated. No material amounts were recognized in fiscal 2009 or 2008 as a result of the modification.
The modification clause expired in February 2009.
Stock Units
Under the 2006 Plan, Stock Units are granted to employees and members of the Board of Directors. Vesting
generally occurs over a period of three to four years of continued service by the employee in equal annual
installments. Vesting is immediate in the case of members of the Board of Directors. In some cases, vesting is
subject to the attainment of a pre-determined financial target (“Performance Shares”). Performance Shares
generally vest over a period of three to four years.
At the end of each reporting period, we evaluate the probability that the Performance Shares will vest. We record
share-based compensation expense on an accelerated basis based on the grant-date fair value and the probability
that the pre-determined financial target will be achieved.
A summary of Stock Unit activity under the 2006 Plan for fiscal 2010 is as follows:
Shares
Weighted-Average
Grant-Date
Fair Value
Balance at January 30, 2010 ................................................... 11,407,311 $19.08
Granted .................................................................... 3,431,422 $21.86
Granted, with vesting subject to performance conditions ........................ 603,468 $21.72
Vested...................................................................... (3,375,145) $17.22
Forfeited.................................................................... (1,054,428) $19.01
Balance at January 29, 2011 ................................................... 11,012,628 $19.20
A summary of additional information about Stock Units is as follows:
Fiscal Year
2010 2009 2008
Weighted-average fair value per share of Stock Units granted $21.84 $11.40 $18.15
Grant-date fair value of Stock Units vested (in millions) ............................. $58$45$28
The aggregate intrinsic value of unvested Stock Units at January 29, 2011 was $211 million.
At January 29, 2011, there was $59 million (before any related tax benefit) of unrecognized share-based
compensation, adjusted for estimated forfeitures, related to unvested Stock Units, which is expected to be
recognized over a weighted-average period of 2.25 years. Total unrecognized share-based compensation may be
adjusted for future changes in estimated forfeitures.
Stock Units Based on Performance Metrics
Under the 2006 Plan, some Stock Units are granted to certain employees only after the achievement of
pre-determined performance metrics. Once the Stock Unit is granted, vesting is then subject to continued service
by the employee, and expense is recognized over a period of three years on an accelerated basis.
59