Exhibit 10.12


 


AMENDED AND RESTATED 

EXECUTIVE EMPLOYMENT AGREEMENT


 


This AMENDED AND RESTATED EXECUTIVE EMPLOYMENT AGREEMENT
(the “Agreement”), made as of December 18,
2008 between Guess?, Inc., a Delaware corporation (the “Company”), and Paul Marciano (the “Executive”).


 


W I T N E S S E T H:


 


WHEREAS,  the Executive is a co-founder of
the Company and the Company and the Executive are parties to that certain
Executive Employment Agreement dated as of January 1, 2007 (the “Prior
Agreement”).


 


WHEREAS, the Company and the Executive wish
to amend and restate the Prior Agreement upon the terms set forth in this
Agreement to comply with Section 409A of the Internal Revenue Code of
1986, as amended (“Section 409A”) effective as of the date hereof.


 


WHEREAS, the Company recognizes that the Executive’s talents and
abilities are unique and have been integral to the success of the Company.


 


WHEREAS, the Executive is willing to commit himself to serve the
Company on the terms and conditions herein provided.


 


WHEREAS, the Company wishes to continue to retain the services of the
Executive and anticipates that the Executive’s contribution to the growth and
success of the Company will continue to be substantial.


 


NOW THEREFORE, in consideration of
the foregoing, of the mutual promises contained herein and of other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:


 


1.                                      POSITION/DUTIES.


 


(a)                                  During
the Employment Term (as defined in Section 2 below), the Executive shall
serve as the Company’s Chief Executive Officer and as Vice Chairman of the
Board of Directors.  In this capacity the Executive
shall have such duties, authorities and responsibilities commensurate with the
duties, authorities and responsibilities of persons in similar capacities in
similarly sized companies and such other duties and responsibilities as the
Board of Directors of the Company (the “Board”) shall designate that are
consistent with the Executive’s position as Chief Executive Officer.  The Executive shall report exclusively to the
Board.  The Executive shall have
authority as is appropriate to carry out his duties and responsibilities as set
forth in this Agreement.


 


(b)                                 During
the Employment Term (as defined below), the Executive shall use the Executive’s
best reasonable efforts to perform faithfully and efficiently the duties and
responsibilities assigned to the Executive hereunder and shall devote
substantially all of the Executive’s business time (excluding periods of
vacation and other approved leaves of absence) as is reasonably necessary to
such performance of the Executive’s duties with the Company.  Subject to Board approval, the Executive may
serve on the board of directors or advisory boards of other for profit
companies provided that such service does not create a potential business
conflict or the appearance thereof. 
Nothing in this Agreement shall prevent the Executive from managing his
family’s personal investments so long as such activities do not materially
interfere with the performance of the Executive’s duties hereunder or create a
potential business conflict or the appearance thereof.


 

















 


(c)                                  During
the Employment Term, the Board shall nominate the Executive for re-election as
a member of the Board at the expiration of the Executive’s then-current term.


 


(d)                                 The
Company shall not relocate the Executive’s principal place of business outside
of the Los Angeles metropolitan area without the Executive’s written consent.


 


(e)                                  The
Executive shall be provided with appropriate office and secretarial facilities
in each of the Company’s principal executive offices and any other location
that the Executive reasonably deems necessary to have an office and support
services in order for the Executive to perform his duties to the Company.


 


2.                                      EMPLOYMENT TERM.  The
Executive’s term of employment under this Agreement (such term of employment,
as it may be extended or terminated, is herein referred to as the “Employment Term”) shall be for a term
commencing on January 1, 2007 (the effective date of the Prior Agreement,
referred to herein as the “Effective Date”) and, unless terminated earlier as
provided in Section 7 hereof, ending on the last day of the fifth (5th) whole Fiscal Year of the
Company commencing on or after the Effective Date (the “Original Employment Term”), provided that the Employment Term
shall be automatically extended, subject to earlier termination as provided in Section 7
hereof, for successive additional one (1) Fiscal Year periods (the “Additional Terms”), unless, on or
before ninety (90) days prior to the expiration of the Original Employment Term
or of any Additional Term, the Company or the Executive has notified the other
in writing that the Employment Term shall terminate at the end of the then-current
term.


 


3.                                      BASE SALARY.  The
Company agrees to pay the Executive a base salary (the “Base Salary”) at an annual rate of not less than One Million
Dollars ($1,000,000), payable in accordance with the regular payroll practices
of the Company, but not less frequently than monthly.  The Executive’s Base Salary shall be subject
to annual review by the Board (or a committee thereof) after 2007 and may be
increased, but not decreased, from time to time by the Board.  No increase to Base Salary shall be used to
offset or otherwise reduce any obligations of the Company to the Executive
hereunder or otherwise.  The base salary
as determined herein from time to time shall constitute “Base Salary” for
purposes of this Agreement.


 


4.                                      ANNUAL INCENTIVE BONUS AND OTHER BONUSES.  During the Employment Term, the Executive
shall be eligible to participate in the Company’s annual bonus and other
incentive compensation plans and programs for the Company’s senior executives
at a level commensurate with the Executive’s position.  For each whole fiscal year (“Fiscal Year”)
that begins on or after January 1, 2007 and ends not later than the
expiration of the Employment Term, the Executive shall be eligible to earn an
annual cash bonus (the “Bonus”) under the Company’s Annual Incentive Bonus
Plan, as amended from time to time (the “Bonus Plan”), and, if appropriate, the
Company’s 2004 Equity Incentive Plan, as amended from time to time (the “Equity
Plan”), based upon the achievement by the Company and its subsidiaries of
performance goals under the Bonus Plan and under the Equity Plan for each such
Fiscal Year established by the Compensation Committee of the Board of Directors
(the “Compensation Committee”).  The
Compensation Committee shall establish objective criteria to be used to
determine the extent to which such performance goals have been satisfied.  The range of the Bonus opportunity for each
Fiscal Year will be as determined by the Compensation Committee based upon the
extent to which such performance goals are achieved, provided that the annual
target Bonus opportunity shall be at least 200% of the Executive’s Base Salary
(for each such year, the “Target Bonus”), the threshold Bonus for a Fiscal Year
shall be one-half the Target Bonus for such year and the maximum Bonus payable
pursuant to this Section 4 for any Fiscal Year shall not exceed the amount
that is 300% of the Executive’s Base Salary for such year.  The Bonus, if any, payable to the Executive
in respect of any Fiscal Year will be paid at the same time that bonuses are
paid to other executives of the Company, but in any event within seventy-five
(75) days after the conclusion of such Fiscal Year.  After the expiration of the Bonus Plan and
the Equity Plan, the Executive’s right to receive future Bonus opportunities
under such plan is subject to approval by the stockholders of the Company of a
similar successor plan under which such opportunity may be granted.  In addition to the Bonus, the Executive shall
retain the special bonus opportunity (the “Licensing Bonus”) awarded by the
Compensation Committee to the Executive on September 27, 2005, as modified
by an action by written consent of the Compensation Committee dated as of November 1,
2005, with respect to the performance of the Company’s licensing segment.  The Compensation Committee may, in its sole
discretion, award additional bonuses to the Executive.


 


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5.                                      EQUITY BASED INCENTIVE AWARDS.


 


(a)                                EMPLOYMENT
INDUCEMENT AWARD.  The Company shall
grant the Executive under the Equity Plan as of January 1, 2007 a
Restricted Stock Award (“Restricted Stock”) equal to 500,000 shares of the
Company’s common stock subject to the following terms and conditions:


 


(i)                                     If
in any whole Fiscal Year commencing on or after January 1, 2007 and during
the Employment Term, the Company shall record earnings per share (“Earnings per
Share”) growth of greater than the Applicable Annual Target as compared to the
immediately preceding Fiscal Year, then 20% of the Restricted Stock shall become
vested as of the first business day following the issuance of the Company’s
financial statement for such year, provided the Executive is then employed by
the Company.  If the Earnings per Share
growth requirement is not met for any such year, all of the shares of the
Restricted Stock eligible for vesting for that year shall vest on the first
business day following the issuance of the Company’s financial statement for
any subsequent Fiscal Year during the Original Employment Term if the
cumulative compound average Earnings per Share growth after the 2006 Fiscal
Year through such subsequent Fiscal Year is more than the Applicable Cumulative
Target for such subsequent Fiscal Year. 
The “Applicable Annual Target” for each of the first, second and third
whole Fiscal Years that commences on or after January 1, 2007 is a growth
in Earnings per Share of 15% or more as compared to the immediately preceding
Fiscal Year.  The “Applicable Cumulative
Target” for each of the first, second and third whole Fiscal Years that
commences on or after January 1, 2007 is a 15% rate of cumulative compound
average Earnings per Share growth.  The “Applicable
Annual Target” and the “Applicable Cumulative Target” for each of the fourth
and fifth whole Fiscal Years that commences on or after January 1, 2007
will be a rate of Earnings per Share growth and cumulative compound average
Earnings per Share growth, respectively, determined by the Compensation
Committee of the Board in its sole discretion not later than the end of the
first quarter of such Fiscal Year.


 


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(ii)                                  For
purposes of this Agreement, Earnings per Share shall be equal to the basic
earnings per share calculated in accordance with accounting principles
generally accepted in the United States and as reported in the Company’s
financial statements as filed with the Securities and Exchange Commission,
except that certain adjustments may be made for certain non-recurring or
unusual non-cash items recognized in accordance with accounting principles
generally accepted in the United States including, but not limited to, any
write-offs of unamortized deferred financing costs and any asset impairment
write-downs, which the Committee determines in its sole discretion to exclude
for purposes of this Agreement.


 


(iii)                             The
Executive shall have the right to vote the shares of the Restricted Stock, and
shall have dividend rights as to such shares, before any forfeiture of the
shares of the Restricted Stock and while such shares are restricted.  The number of shares credited to the
Executive shall be subject to adjustment in accordance with the provisions of
the Equity Plan (for example, in connection with the payment of a stock
dividend by the Company).


 


(iv)                              The
shares of the Restricted Stock not yet vested or forfeited shall become 100%
vested in the event that the Executive dies or becomes Disabled (within the
meaning of Section 7(a)) or there is a Change in Control, in each case
while employed by the Company or an affiliate during the Employment Term.  For this purpose, the term “Change in Control”
is used as defined in the Equity Plan except that in no event shall a “Change
in Control” be triggered pursuant to clause (A) of such term as so defined
unless the Acquiring Person becomes the Beneficial Owner of twenty percent
(20%) or more of the then outstanding shares of Common Stock or the Combined
Voting Power of the Company (except pursuant to an offer for all outstanding
shares of Common Stock at a price and upon such terms and conditions as a
majority of the Continuing Directors determine to be in the best interests of
the Company and its shareholders (other than an Acquiring Person on whose
behalf the offer is being made)) in one or more bona fide transactions and such
level of ownership of such Common Stock or Combined Voting Power, as
applicable, exceeds the aggregate level of ownership of the Marcianos of such
Common Stock or Combined Voting Power, respectively.  For purposes of the preceding sentence, “Marcianos”
means Maurice Marciano, Paul Marciano, and any trust established in whole or in
part for the benefit of one or more of them or their family members, or any
other entity controlled by one or more of them, and any other capitalized term
used in such sentence is used as defined in the Equity Plan if not otherwise
defined in this Agreement.  If the
Executive terminates his employment with the Company for “Good Reason” (as
defined in Section 7(e) of this Agreement), or is terminated by the
Company without “Cause” (as defined in Section 7(c) of this
Agreement) or for Disability, the shares of the Restricted Stock not yet vested
or forfeited shall become 100% vested.


 


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(v)                                 In
all events other than those previously addressed in Section 5(a)(iv), if
the Executive ceases to be an employee of the Company or an affiliate, the
Executive shall be vested only as to that percentage of shares of the
Restricted Stock which are vested at the time of the termination of his
employment and the Executive shall forfeit the right to the shares of the
Restricted Stock which are not yet vested on the termination date.  Further, any Restricted Stock which is
unvested at the conclusion of the Original Employment Term shall be forfeited
and terminate.  Unvested shares of the
Restricted Stock that are forfeited shall be immediately transferred to the
Company without any payment by the Company, and the Company shall have the full
right to cancel any evidence of the Executive’s ownership of such forfeited
shares.


 


(vi)                              The
Restricted Stock Award shall be granted pursuant to and, to the extent not
contrary to the terms of this Agreement, shall be subject to all of the terms
and conditions imposed upon such awards granted under the Equity Plan.


 


(b)                               PERFORMANCE SHARE AWARDS. 
The Company shall grant the Executive under the Equity Plan at the
completion of each whole Fiscal Year commencing on and after January 1,
2007 and during the Employment Term shares of the Company’s common stock (“Performance
Shares”) based upon the achievement by the Company and its subsidiaries of
performance goals under the Equity Plan for each such Fiscal Year established
by the Compensation Committee.  The
Compensation Committee shall establish objective criteria to be used to
determine the extent to which such performance goals have been satisfied.  Performance Shares will be granted for each
whole Fiscal Year during the Employment Term at “target” and “stretch” levels
of 55% (i.e., $550,000 for 2007) and 82.5% (i.e., $825,000 for 2007) of the
Executive’s Base Salary for such Fiscal Year. 
Performance Shares granted in any particular Fiscal Year will be subject
to the standard vesting schedule established by the Compensation Committee for
Performance Share grants in that year (the current vesting schedule is a 4-year
vesting schedule).  After the expiration
of the Equity Plan, the Executive’s right to receive future grants of
Performance Shares is subject to approval by the stockholders of the Company of
a similar successor plan under which such awards may be granted.


 


(c)                                STOCK OPTION AWARDS. 
The Company shall grant the Executive under the Equity Plan at the
completion of each whole Fiscal Year commencing on or after January 1,
2007 and during the Employment Term stock options to purchase the Company’s
common stock at an exercise price of not less than the fair market value of
such stock on the grant date (“Stock Options”) based upon the achievement by
the Company and its subsidiaries of performance goals under the Equity Plan for
each such Fiscal Year established by the Compensation Committee.  The Compensation Committee shall establish
objective criteria to be used to determine the extent to which such performance
goals have been satisfied.  Stock Options
for each whole Fiscal Year during the Employment Term will be granted at a
grant-date Black-Scholes value of 55% of the Executive’s Base Salary for such
Fiscal Year (i.e., $550,000 for 2007). 
Stock Options granted in any particular Fiscal Year will be subject to
the standard vesting schedule established by the Compensation Committee for
Stock Option grants in that year (the current vesting schedule is a 4-year
vesting schedule).  After the expiration
of the Equity Plan, the Executive’s right to receive future grants of Stock
Options is subject to approval by the stockholders of the Company of a similar
successor plan under which such awards may be granted.


 


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(d)                               DISCRETIONARY GRANTS.  In addition to the Employment Inducement,
Performance Share and Stock Option Awards under Section 5(a), (b) and
(c) above, at the sole discretion of the Board or the Committee, the
Executive shall be eligible to participate throughout the Employment Term in
such long-term incentive plans and programs as may be in effect from time to
time in accordance with the Company’s compensation practices and the terms and
provisions of any such plans or programs.


 


6.                                      EMPLOYEE BENEFITS.


 


(a)                                  BENEFIT PLANS.  The Executive shall be entitled to
participate in all employee benefit plans of the Company including, but not
limited to, equity, pension, thrift, Section 401(k), profit sharing,
medical coverage, education, or other retirement (including without limitation
supplemental executive retirement plans) or welfare benefits that the Company
has adopted or may adopt, maintain or contribute to for the benefit of its
senior executives at a level commensurate with the Executive’s positions
subject to satisfying the applicable eligibility requirements.  The Executive shall at all times during the
Employment Term be entitled to participate in the Guess?, Inc.
Supplemental Executive Retirement Plan, as in effect on January 1, 2006,
and any deferred compensation plan which may be maintained by the Company from
time to time.


 


(b)                                 VACATION. 
The Executive shall be entitled to accrue annual paid vacation in
accordance with the Company’s policy applicable to senior executives, but in no
event less than twenty business days per calendar year (as prorated for partial
years), which vacation may be taken at such times as the Executive elects with
due regard to the needs of the Company. 
The Executive shall not be permitted to accrue more than a total of
twenty five (25) vacation days at any time. 
Once the Executive reaches the maximum accrual, the Executive shall not
accrue any additional vacation days until a portion of the Executive’s accrued
vacation time is used.


 


(c)                                  AUTOMOBILE.  The
Company shall continue to provide the Executive with an automobile during the
Employment Term in a manner consistent with its past practice.


 


(d)                                 PERQUISITES.  The Company shall provide to the Executive,
at the Company’s cost, all perquisites which other senior executives of the
Company are generally entitled to receive in accordance with Company policy as
set by the Board from time to time.


 


(e)                                  LIFETIME RETIREE MEDICAL BENEFIT.  The
Company shall provide the Executive and his eligible family members with
Post-Retirement Health Benefits at its expense commencing upon expiration of
the Employment Term for any reason other than a termination for Cause, in which
case the Company shall have no obligation to provide Post-Retirement Health
Benefits.  The term “Post-Retirement Health Benefits” means health benefits
(including medical, prescription, dental and vision coverage, if and to the
extent applicable) for the remainder of the Executive’s life under the plans
provided to the Company’s executive officers and their eligible family members,
as in effect from time to time; provided that the Post-Retirement Health
Benefits may be made secondary to any other benefits to which the Executive may
be entitled under another employer-provided plan or a governmental plan such as
Medicare.


 


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(f)                                  LIFE INSURANCE BENEFIT. 
The Company will purchase, and will pay the premiums for, life insurance
coverage on the Executive’s life with the Executive (or his assignee) as the
owner of the policy and with the right to designate the beneficiary of the
death benefit.  The premiums paid on the
policy shall be imputed as income to the Executive.  Such insurance coverage shall be structured
to comply with the requirements of the Sarbanes-Oxley Act and similar legal
requirements.  The Executive’s rights
pursuant to this Section 6(f) shall be fully vested and non-forfeitable
at all times.  The Company shall be
obligated in all events to pay all scheduled premium payments unless the
Executive dies prior to the end of the last scheduled premium payment.  The Executive’s rights to the policy and any
premium payments by the Company shall not be subject to attachment,
garnishment, alienation or other similar action by any person to the maximum
extent permitted by law.  The
Compensation Committee and the Executive will negotiate the other terms and
conditions of such insurance coverage in good faith.


 


(g)                               BUSINESS AND ENTERTAINMENT EXPENSES.  Upon presentation of appropriate
documentation, the Executive shall be reimbursed in accordance with the Company’s
expense reimbursement policy for all reasonable and necessary business and
entertainment expenses incurred in connection with the performance of the
Executive’s duties hereunder.


 


(h)                               CHANGE IN CONTROL.  In
the event there is a “Change in Control” (as such term is defined for purposes
of Section 5(a)(iv)), the Company shall establish a “rabbi trust” for the
benefit of the Executive and fund it with cash or cash equivalents sufficient
to fully pay when due and payable all payments that potentially would be
required to be made under Section 8(d) hereof if the Executive were to
be terminated without Cause. 
Notwithstanding the foregoing, in no event shall the Company establish
or fund any such rabbi trust in a manner or on terms that would result in the
imposition of any tax, penalty or interest under Section 409A(b)(1) of
the Code and in no event shall the Company be obligated to, nor shall it, fund
any such rabbi trust “in connection with a change in the employer’s financial
heath” within the meaning of Section 409A(b)(2) of the Code.


 


7.                                      TERMINATION.  The
Executive’s employment and the Employment Term shall terminate on the first of
the following to occur:


 


(a)                                DISABILITY. 
Upon written notice by the Company to the Executive of termination due
to Disability, while the Executive remains Disabled.  For purposes of this Agreement, “Disabled”
and “Disability” shall (i) have
the meaning defined under the Company’s then-current long-term disability
insurance plan, policy, program or contract as entitles the Executive to
payment of disability benefits thereunder, or (ii) if there shall be no
such plan, policy, program or contract, mean permanent and total disability as
defined in Section 22(e)(3) of the Internal Revenue Code of 1986, as
amended (the “Code”).


 


(b)                                 DEATH. 
Automatically on the date of death of the Executive.


 


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(c)                                 CAUSE. 
Immediately upon written notice by the Company to the Executive of a
termination for Cause.  “Cause” shall mean (i) the
Executive’s conviction or plea of nolo contendere to a felony or any crime
involving moral turpitude; (ii) a willful act of theft, embezzlement or
misappropriation from the Company; or (iii) a determination by the Board
that the Executive has willfully and continuously failed to perform
substantially the Executive’s duties (other than any such failure resulting
from the Executive’s Disability or incapacity due to bodily injury or physical
or mental illness), after (A) a written demand for substantial performance
is delivered to the Executive by the Board which specifically identifies the manner
in which the Board believes that the Executive has not substantially performed
the Executive’s duties and provides the Executive with the opportunity to
correct such failure if, and only if, such failure is capable of cure; and (B) the
Executive’s failure to correct such failure which is capable of cure within 30
days of receipt of the demand for performance. 
For the avoidance of doubt, the parties expressly agree that only Cause
pursuant to Section 7(c)(iii) shall be deemed capable of cure.  Notwithstanding the foregoing, “Cause” shall
not include any act or omission that the Executive believes in good faith to
have been in or not opposed to the interest of the Company (without intent of
the Executive to gain therefrom, directly or indirectly, a profit to which he
was not legally entitled). The Company may only terminate the Executive’s
employment for Cause if (A) a determination that Cause exists is made and
approved by three fourths of the independent directors of the Company’s Board, (B) for
a termination for Cause under Section 7(c)(iii), the Executive is given at
least five (5) days’ written notice of the Board meeting called to make
such determination, and (C) for a termination for Cause under Section 7(c)(iii),
the Executive and his legal counsel are given the opportunity to address such
meeting.  In the event that the Board has
so determined in good faith that Cause exists, the Board shall have no
obligation to terminate the Executive’s employment if the Board determines in
its sole discretion that such a decision not to terminate the Executive’s
employment is in the best interest of the Company.


 


(d)                                 WITHOUT CAUSE.  Upon written notice by the Company to the
Executive of an involuntary termination without Cause and other than due to
death or Disability prior to age sixty-five (65).


 


(e)                                 GOOD REASON.  Upon written notice by the Executive to the
Company of termination for Good Reason unless the reasons for any proposed
termination for Good Reason are remedied in all material respects by the
Company within thirty (30) days following written notification by the Executive
to the Company.  “Good Reason” means the occurrence of any one or more of the
following events prior to age sixty-five (65) unless the Executive specifically
agrees in writing that such event shall not be Good Reason:


 


(i)                                     Any
material breach of this Agreement by the Company, including:


 


(A)                              the
failure of the Company to pay the compensation and benefits set forth in
Sections 3 through 6 of this Agreement;


 


(B)                                any
material adverse change in the Executive’s status, position or responsibilities
as Chief Executive Officer of the Company;


 


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(C)                                any
failure to nominate or elect the Executive as Chief Executive Officer of the
Company or as member of the Board;


 


(D)                               causing
or requiring the Executive to report to anyone other than the Board or


 


(E)                                 assignment
of duties materially inconsistent with his position and duties described in
this Agreement,


 


(ii)                                 the
failure of the Company to assign this Agreement to a successor to all or
substantially all of the business or assets of the Company or failure of such a
successor to the Company to explicitly assume and agree to be bound by this
Agreement,


 


(iii)                              requiring
the Executive to be principally based at any office or location outside of the
Los Angeles metropolitan area;


 


(iv)                             purported
termination of the Executive’s employment for “Cause” in a bad faith violation
of the substantive and procedural requirements of Section 7(c), or


 


(v)                                a
termination of employment by the Executive for any reason or no reason during
the 30-day period commencing 6 months after a Change of Control.


 


(f)                                  RETIREMENT.  Upon thirty (30) days’
prior written notice by the Executive to the Company of the Executive’s
termination of employment without Good Reason (which the Company may, in its
sole discretion, make effective earlier than any notice date).


 


8.                                      CONSEQUENCES OF TERMINATION. 
Any termination payments made and benefits provided under this Agreement
to the Executive shall be in lieu of any termination or severance payments or
benefits for which the Executive may be eligible under any of the plans,
policies or programs of the Company or its affiliates.  Except to the extent otherwise provided in
this Agreement, all benefits and awards under the Company’s compensation and
benefit programs shall be subject to the terms and conditions of the plan or
arrangement under which such benefits accrue, are granted or are awarded.  The following amounts and benefits shall be due
to the Executive:


 


(a)                                  DISABILITY. 
Upon such termination, the Company shall pay or provide the Executive
with the Accrued Amounts (defined in Section 8(g) below).  The Executive will also be paid a pro-rata
portion of the Executive’s Bonus and Licensing Bonus for the performance year
in which the Executive’s termination occurs, which shall be paid at the time
that annual Bonuses are paid to other senior executives, but in any event
within seventy-five (75) days after the conclusion of the Fiscal Year to which
such Bonus and Licensing Bonus relates (determined by multiplying the amount
the Executive would have received based upon target performance had employment
continued through the end of the performance year by a fraction, the numerator
of which is the number of days during the performance year of termination that
the Executive is employed by the Company and the denominator of which is 365).


 


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(b)                                 DEATH. 
In the event the Employment Term ends on account of the Executive’s
death, the Executive’s estate (or to the extent a beneficiary has been
designated in accordance with a program, the beneficiary under such program)
shall be entitled to any Accrued Amounts. 
The Executive’s estate (or beneficiary) will also be paid a pro-rata
portion of the Executive’s Bonus and Licensing Bonus for the performance year
in which the Executive’s termination occurs, which shall be paid at the time
that annual Bonuses are paid to other senior executives, but in any event
within seventy-five (75) days after the conclusion of the Fiscal Year to which
such Bonus and Licensing Bonus relates (determined by multiplying the amount
the Executive would have received based upon target performance had employment
continued through the end of the performance year by a fraction, the numerator
of which is the number of days during the performance year of termination that
the Executive is employed by the Company and the denominator of which is 365).


 


(c)                                  TERMINATION FOR CAUSE.  If the Executive’s employment should be
terminated by the Company for Cause or by the Executive without Good Reason,
the Company shall pay to the Executive any Accrued Amounts.


 


(d)                                 TERMINATION WITHOUT CAUSE OR FOR GOOD REASON.  If the Executive’s employment by the Company
is terminated by the Company other than for Cause (other than a termination due
to Disability or death) or by the Executive for Good Reason, the Company shall
pay or provide the Executive with


 


(i)                                     the
Accrued Amounts;


 


(ii)                                 a
pro-rata portion of the Executive’s Bonus for the performance year in which the
Executive’s termination occurs, which shall be paid at the time that annual
Bonuses are paid to other senior executives, but in any event within
seventy-five (75) days after the conclusion of the Fiscal Year to which such
Bonus relates (determined by multiplying the amount the Executive would have
received based upon actual performance had employment continued through the end
of the performance year (but, as to any performance year that begins on or
prior to January 1, 2009, in no event less than the amount for target
performance for that year) by a fraction, the numerator of which is the number
of days during the performance year of termination that the Executive is
employed by the Company and the denominator of which is 365);


 


(iii)                              $5
million if the last day of the Executive’s employment by the Company occurs in
2007 or $3.5 million if the last day of the Executive’s employment by the
Company occurs on or after January 1, 2008 but before December 31, 2012 (for
purposes of clarity, the Company shall have no obligation to the Executive
pursuant to this clause (iii) if the last day of the Executive’s employment by
the Company occurs on or after December 31, 2012);


 


(iv)                              an
amount equal to the product of (A) the sum of (1) the Executive’s
Base Salary and (2) the then Target Bonus multiplied by (B) three
(3), payable in a single lump-sum; and


 


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(v)                                 two
(2) years of additional service credit and age for benefit accrual, early
retirement reduction and vesting purposes under the Guess?, Inc.
Supplemental Executive Retirement Plan.


 


Subject to Section 21(a), the payments provided for in this Section 8(d)(iii) and
8(d)(iv) (to the extent provided therein) shall be paid to the Executive
in the month immediately following the month in which the Executive’s
termination of employment occurs, provided that the date of the Executive’s
termination of employment occurs on the same date as the Executive’s “separation
from service” (within the meaning of Section 409A and after giving effect
to the presumptions set forth in Treasury Regulations Section 1.409A-1(h)(1)(ii))
from the Company and its subsidiaries, otherwise such amounts shall be paid to
the Executive in the month immediately following the month in which the
Executive incurs such a “separation from service.”  Notwithstanding anything to the contrary
contained herein, the Company shall have no obligation to provide any of the
monetary payments and/or benefits provided for in this Section 8(d) (other
than Accrued Amounts) unless and until the Executive executes an effective
general release of all claims in favor of the Company in a form acceptable to
the Company (the “Release”) and delivers such executed Release to the Company within
twenty-one (21) days following the date of his “separation from service.”  For the avoidance of doubt, the Executive’s
execution of the Release is a condition precedent to any obligation of the
Company to provide the monetary payments and/or benefits provided for in this Section 8(d) (other
than Accrued Amounts).


 


In addition, the Company, at its election, shall have the option in its
full and absolute discretion to enter into a two-year consulting agreement with
the Executive in substantially the same form and on substantially the same
conditions as set forth in Appendix A below, with the consulting period (if
any) to commence on the first day following the date of the Executive’s
termination of employment.


 


(e)                                NON-RENEWAL.  A notice
of non-renewal of this Agreement by the Company that would result in expiration
of the Employment Term prior to the Executive’s sixty-fifth (65th) birthday shall be treated as a
termination of the Executive’s employment by the Company without “Cause” for
the purposes of this Agreement.


 


(f)                                  RETIREMENT.  If the
Executive retires under Section 7(f) of this Agreement, the Company
shall pay to the Executive:


 


(i)                                     any
Accrued Amounts;


 


(ii)                                 a
pro-rata portion of the Executive’s Bonus for the performance year in which the
Executive’s termination occurs, which shall be paid at the time that annual
Bonuses are paid to other senior executives, but in any event within
seventy-five  (75) days after the
conclusion of the Fiscal Year to which such Bonus relates (determined by
multiplying the amount the Executive would have received based upon target
performance had employment continued through the end of the performance year by
a fraction, the numerator of which is the number of days during the performance
year of termination that the Executive is employed by the Company and the
denominator of which is 365); and


 


(iii)                             the
Executive shall be considered to have “retired” for purposes of any plans,
programs, agreements or arrangements with the Company or its affiliates.


 


11














 


In addition, the Company shall enter into a two-year
consulting agreement with the Executive in substantially the same form and on
substantially the same conditions as set forth in Appendix A below, with the
consulting period to commence on the first day following the date of the
Executive’s termination of employment.


 


(g)           DEFINITION
OF ACCRUED AMOUNTS.  As used
in this Agreement, “Accrued Amounts” shall mean:


 


(i)            any
unpaid Base Salary through the date of the Executive’s termination and any
accrued vacation in accordance with Company policy, which shall be paid not
later than the next regularly scheduled payroll date following the date of
termination;


 


(ii)           any
unpaid Bonus earned with respect to any Fiscal Year ending on or preceding the
date of the Executive’s termination, which shall be paid at the time that
annual Bonuses for such Fiscal Year are paid to other senior executives, but in
any event within seventy-five (75) days after the conclusion of the Fiscal Year
to which such Bonus relates;


 


(iii)          reimbursement due to the Executive pursuant
to the terms of Section 6(g) for any unreimbursed business expenses
incurred through the date of termination, which shall be paid as soon as
practicable but in all events no later than thirty (30) days following the date
of termination or, if later, promptly following the Executive’s request for
reimbursement of such expenses and upon presentation of appropriate
documentation in accordance with the Company’s expense reimbursement policy
subject to the time limitations of Section 21(c); and


 


(iv)          all
other payments, benefits or perquisites to which the Executive may be entitled
under the terms of any applicable compensation arrangement or benefit, equity
or perquisite plan or program or grant or this Agreement (including any related
gross-up), which in each case shall be paid in accordance with the terms and
conditions of the applicable arrangement, plan, program, grant or agreement.


 


9.            SECTION 4999
EXCISE TAX.  If any payments, rights or benefits
(whether pursuant to the terms of this Agreement or any other plan, arrangement
or agreement of the Executive with the Company or any person affiliated with
the Company) (the “Payments”) received or to be received by the Executive will
be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Code (or any similar tax that may hereafter be imposed), then the Company shall
pay to the Executive an amount in addition to the Payments (the “Gross-Up
Payment”) as calculated below.  The Gross
Up Payment shall be in an amount such that, after deduction of any Excise Tax
on the Payments and any federal, state and local income and employment tax and
Excise Tax on the Gross Up Payment, but before deduction for any federal, state
or local income and employment tax on the Payments, the net amount retained by
the Executive shall be equal to the Payments. 
The process for calculating the Excise Tax, determining the amount of
any Gross-Up Payment and other procedures relating to this Section are set
forth in Appendix B attached hereto.  For
purposes of making the determinations and calculations required herein, the
Accounting Firm (as defined in Appendix B) may rely on reasonable, good faith
interpretations concerning the application of Section 280G and 4999 of the
Code, provided that the Accounting Firm shall make such determinations and
calculations on the basis of “substantial authority” (within the meaning of Section 6662
of the Code) and shall provide opinions to that effect to both the Company and
the Executive.


 


12

















 


10.          CONFIDENTIALITY.  The Executive agrees that the Executive shall
not, directly or indirectly, use, make available, sell, disclose or otherwise
communicate to any person, other than in the course of the Executive’s
employment and for the benefit of the Company, either during the period of the
Executive’s employment or at any time thereafter, any nonpublic, proprietary or
confidential information, knowledge or data relating to the Company, any of its
subsidiaries, affiliated companies or businesses, which shall have been
obtained by the Executive during the Executive’s employment by the
Company.  The foregoing shall not apply
to information that (i) was known to the public prior to its disclosure to
the Executive; (ii) becomes known to the public subsequent to disclosure
to the Executive through no wrongful act of the Executive or any representative
of the Executive; or (iii) the Executive is required to disclose by
applicable law, regulation or legal process (provided that the Executive
provides the Company with prior notice of the contemplated disclosure and
reasonably cooperates with the Company at its expense in seeking a protective
order or other appropriate protection of such information).  Notwithstanding clauses (i) and (ii) of
the preceding sentence, the Executive’s obligation to maintain such disclosed
information in confidence shall not terminate where only portions of the
information are in the public domain.


 


11.           ATTORNEY’S FEES.  To the extent permitted by
law, all reasonable costs and expenses incurred by the Executive in evaluating
and negotiating the terms and conditions of this Agreement shall be promptly
paid on behalf of, or reimbursed, to the Executive by the Company.  If the Executive incurs legal or other fees
and expense in a good faith non-frivolous effort to secure or preserve or
establish entitlement to compensation and benefits under this Agreement, the
Company shall, to the extent permitted by law and regardless of the outcome of
such effort, reimburse the Executive monthly for such fees and expenses.


 


12.           NO ASSIGNMENT.


 


(a)           This Agreement is
personal to each of the parties hereto. 
Except as provided in Section 12(b) below, no party may assign
or delegate any rights or obligations hereunder without first obtaining the
written consent of the other party hereto.


 


(b)           The Company may assign
this Agreement to any successor to all or substantially all of the business
and/or assets of the Company provided the Company shall require such successor
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession had taken place and shall deliver a copy of such assignment to the
Executive.


 


13.           NOTICE.  For the purpose of this Agreement, notices
and all other communications provided for in this Agreement shall be in writing
and shall be deemed to have been duly given (a) on the date of delivery if
delivered by hand, (b) on the date of transmission, if delivered by
confirmed facsimile, (c) on the first business day following the date of
deposit if delivered by guaranteed overnight delivery service, or (d) on
the fourth business day following the date delivered or mailed by United States
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:


 


13

















 


If to the
Executive:


 


At the address
(or to the facsimile number) shown on the records of the Company


 


If to the
Company:


 


Guess?, Inc.

1444 South Alameda Street

Los Angeles, California 90021

Attention:  General Counsel

Facsimile No.:   (213) 765-0911


 


or to such
other address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt.


 


14.           SECTION HEADINGS;
INCONSISTENCY.  The section
headings used in this Agreement are included solely for convenience and shall
not affect, or be used in connection with, the interpretation of this
Agreement.  In the event of any
inconsistency between this Agreement and any other agreement (including but not
limited to any option, stock, long-term incentive or other equity award
agreement), plan, program, policy or practice (collectively, “Other Provision”) of the Company the
terms of this Agreement shall control over such Other Provision to the extent
that the terms of this Agreement are more beneficial to the Executive.


 


15.          SEVERABILITY.  The provisions of this Agreement shall be
deemed severable and the invalidity of unenforceability of any provision shall
not affect the validity or enforceability of the other provisions hereof.


 


16.           COUNTERPARTS.  This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instruments.  One or more counterparts of this Agreement
may be delivered by facsimile, with the intention that delivery by such means
shall have the same effect as delivery of an original counterpart thereof.


 


17.           DISPUTE
RESOLUTION.  In the event of
any controversy, dispute or claim between the parties under, arising out of or
related to this Agreement (including but not limited to, claims relating to
breach, termination of this Agreement, or the performance of a party under this
Agreement) whether based on contract, tort, statute or other legal theory
(collectively referred to hereinafter as “Disputes”), the parties shall follow
the dispute resolution procedures set forth below. Any Dispute shall be settled
exclusively by arbitration, conducted before a single arbitrator in Los
Angeles, California, administered by the American Arbitration Association (“AAA”) in accordance with its
Commercial Arbitration Rules then in effect.  The parties agree to (i) appoint an
arbitrator who is knowledgeable in employment and human resource matters and,
to the extent possible, the industry in which the Company operates, and
instruct the arbitrator to follow substantive rules of law; (ii) require
the testimony to be transcribed; and (iii) require the award to be
accompanied by findings of fact and a statement of reasons for the
decision.  The arbitrator shall have the
authority to permit discovery, to the extent deemed appropriate by the
arbitrator, upon request of a party.  The
arbitrator shall have no power or authority to add to or detract from the
written agreement of the parties.  If the
parties cannot agree upon an arbitrator within ten (10) days after demand
by either of them, either or both parties may request the American Arbitration
Association name a panel of five (5) arbitrators.  The Company shall strike the names of two (2) off
this list, the Executive shall also strike two (2) names, and the
remaining name shall be the arbitrator. 
The parties shall stipulate that arbitration shall be completed within
ninety (90) days.  The decision of the
arbitrator will be final and binding upon the parties hereto.  Judgment may be entered on the arbitrator’s
award in any court having jurisdiction. 
The Company shall bear the costs of the arbitrator and any related forum
fee.


 


14

















 


18.           INDEMNIFICATION.  The Company hereby agrees to indemnify the
Executive and hold the Executive harmless to the fullest extent permitted by
applicable law and under the by-laws of the Company against and in respect to
any and all actions, suits, proceedings, claims, demands, judgments, costs,
expenses (including reasonable attorneys’ fees), losses, and damages resulting
from the Executive’s performance of his duties and obligations with the
Company.  This provision is in addition
to any other rights of indemnification the Executive may have.


 


19.          LIABILITY
INSURANCE.  The Company shall
cover the Executive under directors and officers liability insurance both
during and, while potential liability exists, after the term of this Agreement
in the same amount and to the same extent as the Company covers its other
officers and directors.


 


20.           MISCELLANEOUS.  No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer or director as may be
designated by the Board.  No waiver by
either party hereto at any time of any breach by the other party hereto of, or
compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar
provisions or conditions at the same or at any prior or subsequent time.  This Agreement together with all exhibits
hereto sets forth the entire agreement of the parties hereto in respect of the
subject matter contained herein.  No
agreements or representations, oral or otherwise, express or implied, with
respect to the subject matter hereof have been made by either party which are
not expressly set forth in this Agreement. 
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California without
regard to its conflicts of law principles. 
Notwithstanding the foregoing, the Company’s rights pursuant to any
confidentiality, proprietary information, assignment of inventions or similar
agreement shall survive and continue in effect.


 


21.           SECTION 409A. 
Notwithstanding anything in this Agreement or elsewhere to
the contrary:


 


(a)           If the Executive is a “specified
employee” as determined pursuant to Section 409A as of the date of the
Executive’s “separation from service” (within the meaning of Section 409A)
and if any payment or benefit provided for in this Agreement or otherwise both (x) constitutes
a “deferral of compensation” within the meaning of Section 409A and (y) cannot
be paid or provided in the manner otherwise provided without subjecting the
Executive to additional tax, interest or penalties under Section 409A,
then any such payment or benefit shall be delayed until the earlier of (i) the
date which is six (6) months after his “separation from service” for any
reason other than death, or (ii) the date of the Executive’s death.  The provisions of this paragraph shall only
apply if, and to the extent, required to avoid the imputation of any tax,
penalty or interest pursuant to Section 409A of the Code.  Any
payment or benefit otherwise payable or to be provided to the Executive upon or
in the six (6) month period following the Executive’s “separation from
service” that is not so paid or provided by reason of this Section 21(a) shall
be accumulated and paid or provided to the Executive in a single lump sum, as
soon as practicable (and in all events within 15 days) after the date that is
six (6) months after the Executive’s “separation from service” (or, if
earlier, as soon as practicable, and in all events within 15 days, after the
date of the Executive’s death) together with interest for the period of delay,
compounded annually, equal to the prime rate (as published in The Wall Street
Journal), and in effect as of the date the payment or benefit should otherwise
have been provided.


 


15

















 


(b)           It is intended that any
amounts payable under this Agreement and the Company’s and the Executive’s
exercise of authority or discretion hereunder shall comply with and avoid the
imputation of any tax, penalty or interest under Section 409A.  This Agreement shall be construed and
interpreted consistent with that intent.


 


(c)           Any reimbursement
payment due to the Executive under Section 6(e) (only to the extent
that such benefits are taxable to the Executive), Section 6(g), and Section 11
(only to the extent that legal fees incurred under Section 11 are not
reimbursed in connection with a bona fide legal claim exempt under Section 409A
pursuant to Treasury Regulations Section 1.409A-1(b)(11)) shall be paid to
the Executive on or before the last day of the Executive’s taxable year
following the taxable year in which the related expense was incurred.  Any reimbursement payment due to the
Executive pursuant to such provisions and the provision of any taxable benefits
to the Executive under Sections 6(d), 6(e), 6(f), 6(g) and Section 11
are not subject to liquidation or exchange for another benefit and the amount
of such expenses eligible for reimbursement or such benefits that the Executive
receives in one taxable year shall not affect the expenses eligible for
reimbursement or the amount of such benefits that the Executive receives in any
other taxable year.


 


22.           FULL
SETTLEMENT.  Except as set
forth in this Agreement, the Company’s obligation to make the payments provided
for in this Agreement and otherwise to perform its obligations hereunder shall
not be affected by any circumstances, including without limitation, set-off,
counterclaim, recoupment, defense or other claim, right or action which the
Company may have against the Executive or others, except to the extent any
amounts are due the Company or its subsidiaries or affiliates pursuant to a
judgment against the Executive.  In no
event shall the Executive be obliged to seek other employment or take any other
action by way of mitigation of the amounts payable to the Executive under any
of the provisions of this Agreement, nor shall the amount of any payment
hereunder be reduced by any compensation earned by the Executive as a result of
employment by another employer, except as set forth in this Agreement.


 


23.           REPRESENTATIONS.  Except as otherwise disclosed to the Company
in writing, the Executive represents and warrants to the Company that the
Executive has the legal right to enter into this Agreement and to perform all
of the obligations on the Executive’s part to be performed hereunder in
accordance with its terms and that the Executive is not a party to any
agreement or understanding, written or oral, which could prevent the Executive
from entering into this Agreement or performing all of the Executive’s
obligations hereunder.


 


16

















 


24.           WITHHOLDING.  The Company may withhold from any and all
amounts payable under this Agreement such federal, state and local taxes as may
be required to be withheld pursuant to any applicable law or regulation.


 


25.           NON-EXCLUSIVITY OF RIGHTS.  Nothing in this Agreement shall prevent or
limit the Executive’s continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company and for which the
Executive may qualify, nor shall anything herein limit or otherwise affect such
rights as the Executive may have under any restricted stock unit or other
agreement with the Company or any of its affiliated companies.  Except as otherwise provided herein, amounts
and benefits which are vested benefits or which the Executive is otherwise
entitled to receive under any plan, program, agreement or arrangement of the
Company at or subsequent to the date of termination shall be payable in accordance
with such plan or program.


 


26.           SURVIVAL. 
The respective obligations of, and benefits afforded to, the Company and
the Executive that by their express terms or clear intent survive termination
of the Executive’s employment with the Company, including, without limitation,
the provisions of Sections 8, 9, 10, 11, 12, 17, 18, 19, 21, 22 and 24 of this
Agreement, will survive termination of the Executive’s employment with the
Company, and will remain in full force and effect according to their terms.


 


27.           AGREEMENT OF THE PARTIES.  The language used in this Agreement will be
deemed to be the language chosen by the parties hereto to express their mutual
intent, and no rule of strict construction will be applied against any
party hereto.  Neither the Executive nor
the Company shall be entitled to any presumption in connection with any
determination made hereunder in connection with any arbitration, judicial or
administrative proceeding relating to or arising under this Agreement.


 


IN WITNESS WHEREOF,
the parties hereto have executed this Agreement as of the date first written
above.


 


	
   

  	
  GUESS?,
  INC. 

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Carlos
  Alberini

  
	
   

  	
  Name:

  	
  Carlos
  Alberini 

  
	
   

  	
  Its:

  	
  President
  and COO

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  PAUL MARCIANO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Paul Marciano

  
				



 


17

















 


APPENDIX A


 


CONSULTING AGREEMENT


 


CONSULTING AGREEMENT dated this
    th day of
                        
20      by and
between Guess?, Inc. (the “Company”) and Paul Marciano (“Marciano”).


 


WITNESSETH:


 


WHEREAS, Marciano serves as the Company’s Chief
Executive Officer and as a member of the Company’s Board of Directors (the “Board”);


 


WHEREAS, Marciano desires to retire from his position
as Chief Executive Officer (the effective date of such retirement is referred
to as the “Retirement Date”) and to provide consulting services to the Company
as the Board may reasonably consider appropriate; and


 


WHEREAS, the parties desire to set forth their
respective rights and obligations regarding Marciano’s consulting arrangement.


 


NOW, THEREFORE, in consideration of the covenants set
forth herein and for other good and valuable consideration, the receipt and
adequacy of which are hereby acknowledged, the parties, intending to be legally
bound, agree as follows:


 


1.             Consulting
Period.  The Company agrees to retain
Marciano as a consultant to provide the services described in Section 3
below from the Retirement Date until the second (2nd) anniversary of the Retirement Date (the
“Consulting Period”), as provided in this Consulting Agreement.


 


2.             Consulting
Services.  Marciano shall provide
such consulting services to the Company as reasonably requested by the Board
from time to time; provided that
Marciano and the Company agree that in no event will the Company require, nor
will Marciano perform, a level of services during the Consulting Period that
would result in Marciano not having had a “separation from service” (within the
meaning of Section 409A of the Internal Revenue Code of 1986, as amended (“Section 409A”))
from the Company and its subsidiaries as of the date his employment by the
Company terminated.  These services may
include but are not limited to actively participating in major marketing or
sales initiatives, performing any transition and integration services related
to the Company’s business and cooperating with the Company regarding any
litigation initiated involving matters of which Marciano has particular
knowledge.  Marciano agrees to be
available up to seven days per month during the Consulting Period to perform
the Consulting Services.  The Consulting
Services will be performed at such times as are reasonably requested by the
Company after reasonable consultation with Marciano.  Marciano shall provide these services in Los
Angeles, California, provided that Marciano shall be required to travel for
business and client meetings as reasonably requested by the Company.


 


18

















 


3.            Fees.  As compensation for the Consulting Services,
the Company shall pay Marciano fifty percent (50%) of Marciano’s Base Salary as
of the Retirement Date per annum during the Consulting Period.  Fees shall be paid monthly in arrears by the
15th day of the following month.  Should
Marciano die or become “disabled”
(within the meaning of Marciano’s employment agreement with the Company
immediately prior to employment termination) during the Consulting Period, the
Company shall make a lump sum cash payment to Marciano (or, in the event of his
death, to his estate) of an amount equal to the remaining payments owed through
the end of the Consulting Period, with such payment to be made as soon
as practicable (but in all events within thirty (30) days) following the date
of Marciano’s death or the date Marciano becomes “disabled.”  Marciano
shall not be entitled to participate, and shall not participate in any employee
benefit plan providing benefits to Company employees, whether presently in
force or adopted subsequent to this Consulting Agreement, with respect to his
Consulting Services.  Notwithstanding the
foregoing, Marciano shall retain all compensation and benefits that continue
past his Retirement Date pursuant to the terms of his Amended and Restated
Employment Agreement with the Company dated December 18, 2008 or
otherwise.  All reasonable and necessary
business expenses incurred by Marciano in the performance of the Consulting
Services shall be promptly reimbursed by the Company in accordance with the
Company’s standard expense reimbursement policies applicable to independent
contractors.


 


4.             Status.  Marciano acknowledges and agrees that his
status at all times during the Consulting Period shall be that of an
independent contractor.  Marciano hereby
waives any rights to be treated as an employee or deemed employee of the
Company or any of its affiliates for any purpose following his termination of
employment at the Retirement Date except as provided under his Employment
Agreement.  The parties hereby
acknowledge and agree that the compensation provided for in Section 4
shall represent fees for Consulting Services provided by Marciano as an
independent contractor, and shall be paid without any deductions or
withholdings for taxes.


 


5.            Retained
Property.  During the Consulting
Period, Marciano shall retain all property of the Company in his possession,
including, but not limited to, credit cards, security key cards, telephone
cards, car service cards, computer software or hardware, Company identification
cards, Company records and copies of records, correspondence and copies of
correspondence and other books or manuals issued by the Company.


 


6.             Assignability.  Marciano may not assign or transfer this
Consulting Agreement or any of Marciano’s rights, duties or obligations
hereunder.  The Company may assign this
Consulting Agreement to any person or entity acquiring all or substantially all
of the assets (by merger or otherwise) of the Company so long as such person,
entity or affiliate assumes the Company’s obligations hereunder.


 


7.             Entire
Agreement.  This Consulting Agreement
constitutes the full and complete understanding and agreement of the parties
hereto with respect to engaging Marciano as a consultant to the Company.  This Consulting Agreement may not be changed
or amended orally, but only by an agreement in writing signed by the party against
whom enforcement of any waiver, change, modification or discharge is sought.


 


8.             Divisibility.  If
any one or more of the provisions of this Consulting Agreement or any
application thereof shall be invalid, illegal or unenforceable in any respect,
the validity, legality or enforceability of the remaining provisions and other
application thereof shall not in any way be affected or impaired.


 


19

















 


9.             Applicable
Law.  This Consulting Agreement shall be governed by, and the rights and
obligations of the parties determined in accordance with, the laws of the State
of California as in effect for contracts made and to be performed in the State
of California.


 


10.           Survival.  All of the Company’s obligations hereunder
shall survive the termination of this Consulting Agreement.


 


11.          Counterparts.  This Consulting
Agreement may be executed in counterparts, each of which shall be deemed
an original, all of which shall together constitute one and the same Consulting
Agreement.


 


12.           Section 409A.  It is intended that any amounts payable under
this Agreement and the Company’s and Marciano’s exercise of authority or
discretion hereunder shall comply with and avoid the imputation of any tax,
penalty or interest under Section 409A. 
This Agreement shall be construed and interpreted consistent with that
intent.


 


IN WITNESS WHEREOF, the undersigned have duly
executed this Consulting Agreement as of the day and year first above written.


 


 


	
   

  	
  PAUL MARCIANO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


20

















 


APPENDIX B


 


TAX GROSS-UP PAYMENT RULES AND PROCEDURES


 


1.             Subject
to Paragraph 3 below, all determinations required to be made under Section 9
of this Agreement, including whether a Gross-Up Payment is required and the
amount of such Gross-Up Payment, shall be made by an accounting firm (the “Accounting
Firm”) selected in accordance with Paragraph 2 below.  The Accounting Firm shall provide detailed
supporting calculations both to the Company and the Executive within fifteen
(15) business days of the event that results in the potential for an excise tax
liability for the Executive, which could include but is not limited to a Change
in Control and the subsequent vesting of any cash payments or awards, or the
Executive’s termination of employment, or such earlier time as is required by
the Company.  The initial Gross-Up
Payment, if any, as determined pursuant to this Paragraph 1, shall be paid on
the Executive’s behalf to the applicable taxing authorities within five (5) days
of the receipt of the Accounting Firm’s determination.  If the Accounting Firm determines that no
Excise Tax is payable to the Executive, it shall furnish the Executive with a
written report indicating that he has substantial authority not to report any
Excise Tax on his federal income tax return. 
Any determination by the Accounting Firm shall be binding upon the
Company and the Executive.  As a result
of the uncertainty in the application of Section 4999 of the Code at the
time of the initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made by the Company
should have been made (“Underpayment”), consistent with the calculations
required to be made hereunder.  In the
event that the Company exhausts its remedies pursuant to Paragraph 3 below and
the Executive thereafter is required to make a payment or additional payment of
any Excise Tax, the Accounting Firm shall determine the amount of the
Underpayment that has occurred and any such Underpayment, increased by all
applicable interest and penalties associated with the Underpayment, shall be
promptly paid by the Company to or for the benefit of the Executive.  For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income tax at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes on
earned income at the highest marginal rate of taxation in the state and
locality of the Executive’s residence on the Effective Date of Termination, net
of the maximum reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.


 


2.             The Accounting Firm shall be a public
accounting firm proposed by the Company and agreed upon by the Executive.  If the Executive and the Company cannot agree
on the firm to serve as the Accounting Firm within ten (10) days after the
date on which the Company proposed to the Executive a public accounting firm to
serve as Auditor, then the Executive and the Company shall each select one
accounting firm and those two firms shall jointly select the accounting firm to
serve as the Accounting Firm within ten (10) days after being requested by
the Company and the Executive to make such selection.  The Company shall pay the Auditor’s fee.


 


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3.             The
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of the Gross-Up Payment.  Such
notification shall be given as soon as practicable but no later than fifteen
(15) business days after the Executive knows of such claim and shall apprise
the Company of the nature of such claim and the date on which such claim is
requested to be paid.  The Executive
shall not pay such claim prior to the expiration of the period ending on the
date that any payment of taxes with respect to such claim is due or the thirty
(30) day period following the date on which the Executive gives such notice to
the Company, whichever period is shorter. 
If the Company notifies the Executive in writing prior to the expiration
of such period that it desires to contest such claim, the Executive shall (i) give
the Company any information reasonably requested by the Company relating to
such claim, (ii) take such action in connection with contesting such claim
as the Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with respect to
such claim by an attorney reasonably selected by the Company, (iii) cooperate
with the Company in good faith in order effectively to contest such claim, and (iv) 
permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and
expenses (including attorneys fees and any additional interest and penalties)
incurred in connection with such contest and shall indemnify and hold the
Executive harmless, on an after-tax basis, for any Excise Tax or income tax,
including interest and penalties with respect thereto, imposed as a result of
such representation and payment of costs and expenses.  Without limitation of the foregoing provisions
of this Paragraph 3, the Company shall control all proceedings taken in
connection with such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and conferences with the
taxing authority in respect to such claim and may, at its sole option, either
direct the Executive to pay the tax claimed and sue for a refund or contest the
claim in any permissible manner, and the Executive agrees to prosecute such
contest to a determination before any administrative tribunal, in a court of
initial jurisdiction and in one or more appellate courts, as the Company shall
determine; provided, however, that if the Company directs the Executive to pay
such claim and sue for a refund, the Company shall advance the amount of such
payment to the Executive, on an interest-free basis and shall indemnify and
hold the Executive harmless, on an after-tax basis, from any Excise Tax and
income tax, including interest or penalties with respect thereto, imposed with
respect to such advance or with respect to any imputed income with respect to
such advance; and further provided that any extension of the statute of
limitations relating to payment of taxes for the taxable year of the Executive
with respect to which such contested amount is claimed to be due is limited
solely to such contested amount. 
Furthermore, the Company’s control of the contest shall be limited to
issues with respect to which a Gross-Up Payment would be payable hereunder and
the Executive shall be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any other authority.


 


4.             If,
after the receipt by the Executive of an amount advanced by the Company
pursuant to Paragraph 3 above, the Executive becomes entitled to receive any
refund with respect to such claim, the Executive shall (subject to the Company’s
complying with the requirements of Paragraph 3), promptly pay to the Company
the amount of such refund (together with any interest paid or credited thereon
after taxes applicable thereto).


 


5.             Notwithstanding
anything to the contrary in this Appendix B, any payment under this Appendix B
shall be paid to the Executive promptly but in no event later than the last day
of the end of the Executive’s taxable year following the taxable year in which
the Executive (or the Company) pays or remits the related taxes.


 


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