Exhibit
10.11


 


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 Maurice 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
Chairman of the Board of Directors.  In this capacity, the Executive
shall be responsible to identify and develop key strategic initiatives with the
Company’s Chief Executive Officer and to fulfill such other duties and
responsibilities as the Board of Directors of the Company (the “Board”) shall reasonably designate
that are consistent with the Executive’s position as Chairman.  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 such portion 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; provided, however, that if the Executive notifies the Board that
he wishes to reduce substantially his duties hereunder, the Board may adjust
his Base Salary and other compensation hereunder accordingly.  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 140% 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 225% 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.  The Compensation Committee may, in its sole
discretion, award additional bonuses to the Executive.


 


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5.             EQUITY BASED
INCENTIVE AWARDS.


 


(a)           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 110% (i.e., $1,100,000 for 2007) and 240%
(i.e., $2,400,000 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.


 


(b)           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 110% of the Executive’s Base Salary for such
Fiscal Year (i.e., $1,100,000 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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(c)           DISCRETIONARY
GRANTS.  In addition to the
Performance Share and Stock Option Awards under Section 5(a) and (b) 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 position
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.


 


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(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.


 


(f)            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.


 


(g)           CHANGE IN CONTROL.  In the event there is a Change in Control,
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 health” within the meaning of Section 409A(b)(2) of
the Code.  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.


 


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”).


 


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


 


(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:


 


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(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 Chairman of the Board of the Company;


 


(C)           any
failure to nominate or elect the Executive as Chairman of the Board 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 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).


 


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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 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).


 


(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)          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


 


(iv)          two
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 payment provided
for in this Section 8(d)(iii) (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 amount 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).


 


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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.


 


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.


 


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(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(f) 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.


 


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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:


 


11














 


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.


 


12

















 


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.


 


13

















 


(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(f), 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), 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.


 


14

















 


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

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MAURICE MARCIANO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Maurice Marciano

  
				



 


15

















 


APPENDIX A


 


CONSULTING AGREEMENT


 


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


 


WITNESSETH:


 


WHEREAS, Marciano serves as an executive Chairman of
the Company’s Board of Directors (the “Board”);


 


WHEREAS, Marciano desires to retire from his position
as such an executive Chairman (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.


 


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.


 


16

















 


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.


 


17

















 


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.


 


 


	
   

  	
  MAURICE MARCIANO

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  COMPANY

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Its:

  	
   

  



 


 


18

















 


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.


 


19

















 


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.


 


20