**Exhibit 10.18**

 

**RESTRICTEDSTOCK AGREEMENT**

This**RESTRICTED STOCK AGREEMENT** (the “Agreement”),dated as of **January 1, 2007** (the “Date ofGrant”), is entered into by and between GUESS?, INC., a Delawarecorporation (the “Company”), and  **Paul Marciano** (the “Grantee”).

# **RECITALS**

**WHEREAS**, the Company maintainsthe Guess?, Inc. 2004 Equity Incentive Plan (the “Plan”).

**WHEREAS**, the Compensation Committee of theCompany’s Board of Directors (the “Committee”) has determined to grant arestricted stock award (the “Award”) to the Grantee under the Plan inorder to increase Grantee’s participation in the success of the Company and asan inducement to enter into the Executive Employment Agreement dated as ofJanuary 1, 2007 by and between the Company and the Grantee (the “EmploymentAgreement”);

**NOW, THEREFORE**, the parties hereto agree asfollows:

1.                                       Definitions;Incorporation of Plan Terms. Capitalized terms used herein without definition shall have the meaningsassigned to them in the Plan.  The Awardand all rights of the Grantee under this Agreement are subject to, and theGrantee agrees to be bound by, all of the terms and conditions of the Plan,incorporated herein by this reference. In the event of any conflict or inconsistency between the Plan and thisAward Agreement, the Plan shall govern.

2.                                       Grantof Restricted Stock.  The Granteeshall be entitled to purchase **500,000**restricted shares of the Company’s common stock, par value $0.01 per share (the“Common Stock”), pursuant to the terms and conditions of this Agreement(the “Restricted Stock”).

3.                                       PurchasePrice.  The Grantee shall pay to theCompany, in cash, an aggregate purchase price of $**5,000**(the “Purchase Price”), which amount is equal to the aggregate amount ofthe par value of the Restricted Stock. Such payment of the Purchase Price shall be made to the Company within15 days after the date hereof.

4.                                       RestrictedPeriod.  Subject to Section 7 below,the Award shall vest and restrictions shall lapse as follows (the period fromthe date hereof through each applicable vesting date, the “Restricted Period”):

A.                                   Ifin any whole fiscal year of the Company (“Fiscal Year”) commencing on orafter January 1, 2007 and during the Employment Term (as defined in theEmployment Agreement), the Company shall record earnings per share (“Earningsper Share”) growth of greater than the Applicable Annual Target (as definedbelow) as compared to the immediately preceding Fiscal Year, then 20% of theRestricted Stock shall become vested as of the first business day following theissuance of the Company’s financial statement for such year, provided the Granteeis then employed by the Company.  If theEarnings per Share growth requirement is not met for any such year, all of theshares of the Restricted Stock 

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eligible for vesting for that year shall vest on thefirst business day following the issuance of the Company’s financial statementfor any subsequent Fiscal Year during the Original Employment Term (as definedin Employment Agreement) if the cumulative compound average Earnings per Sharegrowth after the 2006 Fiscal Year through such subsequent Fiscal Year is morethan the Applicable Cumulative Target (as defined below) for such subsequentFiscal Year.  The “Applicable AnnualTarget” for each of the first, second and third whole Fiscal Years thatcommences 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” foreach of the first, second and third whole Fiscal Years that commences on orafter January 1, 2007 is a 15% rate of cumulative compound average Earnings perShare growth.  The “Applicable AnnualTarget” and the “Applicable Cumulative Target” for each of the fourth and fifthwhole Fiscal Years that commences on or after January 1, 2007 will be a rate ofEarnings per Share growth and cumulative compound average Earnings per Sharegrowth, respectively, determined by the Compensation Committee of the Board inits sole discretion not later than the end of the first quarter of such FiscalYear.

B.                                     Forpurposes of this Agreement, Earnings per Share shall be equal to the basicearnings per share calculated in accordance with accounting principlesgenerally accepted in the United States and as reported in the Company’s financialstatements as filed with the Securities and Exchange Commission, except thatcertain adjustments may be made for certain non-recurring or unusual non-cashitems recognized in accordance with accounting principles generally accepted inthe United States including, but not limited to, any write-offs of unamortizeddeferred financing costs and any asset impairment write-downs, which theCommittee determines in its sole discretion to exclude for purposes of thisAgreement.

5.                                       Rightsof a Stockholder.  From and after theDate of Grant and for so long as the Restricted Stock is held by or for thebenefit of the Grantee, the Grantee shall have all the rights of a stockholderof the Company with respect to the Restricted Stock, including but not limitedto the right to receive dividends, if applicable, and the right to vote suchshares.

6.                                       Adjustments Upon Specified Events.  Upon the occurrence of certain eventsrelating to the Company’s Common Stock contemplated by Section 16(b) of thePlan, the Committee will make adjustments, if appropriate, in the number andkind of securities subject to the Award. If any adjustment is made under Section 16(b) of the Plan, therestrictions applicable to the shares of Restricted Stock shall continue ineffect with respect to any consideration or other securities (the “RestrictedProperty” and, for the purposes of this Award Agreement, “Restricted Stock”shall include “Restricted Property,” unless the context otherwise requires)received in respect of such Restricted Stock. Such Restricted Property shall vest at such times in such proportion asthe shares of Restricted Stock to which the Restricted Property isattributable.  To the extent that theRestricted Property includes any cash (other than regular cash dividends providedfor in Section 5 hereof), such cash shall be invested, pursuant to policiesestablished by the 

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Committee, in interestbearing, FDIC-insured (subject to applicable insurance limits) depositsof a depository institution selected by the Committee, the earnings on whichshall be added to and become a part of the Restricted Property.

7.                                       Effectof Cessation of Employment.

A.                                   Theshares of the Restricted Stock not yet vested or forfeited shall become 100%vested in the event that the Grantee dies or becomes Disabled (as defined in Section7(a) of the Employment Agreement) or there is a Change in Control (as definedbelow), in each case while employed by the Company or an affiliate during theEmployment Term.  For this purpose, theterm “Change in Control” is used as defined in the Plan except that inno event shall a “Change in Control” be triggered pursuant to clause (A) ofsuch term as so defined unless the Acquiring Person becomes the BeneficialOwner of twenty percent (20%) or more of the then outstanding shares of CommonStock or the Combined Voting Power of the Company (except pursuant to an offerfor all outstanding shares of Common Stock at a price and upon such terms andconditions as a majority of the Continuing Directors determine to be in thebest interests of the Company and its shareholders (other than an AcquiringPerson on whose behalf the offer is being made)) in one or more bona fidetransactions and such level of ownership of such Common Stock or CombinedVoting Power, as applicable, exceeds the aggregate level of ownership of theMarcianos (as defined below) of such Common Stock or Combined Voting Power,respectively.  For purposes of thepreceding sentence, “Marcianos” means Maurice Marciano, Paul Marciano,and any trust established in whole or in part for the benefit of one or more ofthem or their family members, or any other entity controlled by one or more ofthem, and any other capitalized term used in such sentence is used as definedin the Equity Plan if not otherwise defined in this Agreement.  If the Grantee terminates his employment withthe Company for “Good Reason” (as defined in Section 7(e) of the Employment Agreement),or is terminated by the Company without “Cause” (as defined in Section 7(c) ofthe Employment Agreement) or for Disability, the shares of the Restricted Stocknot yet vested or forfeited shall become 100% vested.

B.                                     Inall events other than those previously addressed in Section 7(A) herein, if theGrantee ceases to be an employee of the Company or an affiliate, the Granteeshall be vested only as to that percentage of shares of the Restricted Stockwhich are vested at the time of the termination of his employment and the Granteeshall forfeit the right to the shares of the Restricted Stock which are not yetvested on the termination date.  Further,any Restricted Stock which is unvested at the conclusion of the OriginalEmployment Term shall be forfeited and terminate.

C.                                     Uponthe occurrence of any forfeiture of shares of Restricted Stock hereunder, suchunvested, forfeited shares and related Restricted Property shall beautomatically transferred to the Company, without any other action by theGrantee, or the Grantee’s beneficiary or personal representative, as the casemay be, and the Company shall refund the Purchase Price to the Grantee (or theGrantee’s beneficiary or personal representative); no additional considerationshall be paid by the Company with respect to such transfer.  No interest shall be credited with respect tonor shall any other adjustments be made to the Purchase 

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Price for fluctuations in the fair market value of theCommon Stock either before or after the transfer date.  The Company may exercise its powers underSection 10(D) hereof and take any other action necessary or advisable toevidence such transfer.  The Grantee, orthe Grantee’s beneficiary or personal representative, as the case may be, shalldeliver any additional documents of transfer that the Company may request toconfirm the transfer of such unvested, forfeited shares and related RestrictedProperty to the Company.

8.                                       Reserved.

9.                                       Restrictionson Transfer.  Prior to the lapse ofthe Restricted Period, neither the Restricted Stock, nor any interest therein,amount payable in respect thereof or Restricted Property shall be sold, transferred,pledged, hypothecated or otherwise disposed of by the Grantee; provided,however, that such transfer restrictions shall not apply to (i) transfers tothe Company or (ii) transfers by will or descent and distribution.  Grantee agrees that the Restricted Stock willnot be sold or otherwise disposed of in any manner that would constitute aviolation of any applicable federal or state securities laws.

10.                                 StockCertificates.

A.                                   *Book Entry Form*.  The Company shall, in itsdiscretion, issue the shares of Restricted Stock subject to the Award either:(i) in certificate form as provided in Section 10(B) below; or (ii) in bookentry form, registered in the name of the Grantee with notations regarding theapplicable restrictions on transfer imposed under this Agreement.

*B.**                                     Certificatesto be Held by Company; Legend. *Any certificates representing shares ofRestricted Stock that may be delivered to the Grantee by the Company prior tothe lapse of restrictions shall be immediately redelivered by the Grantee tothe Company to be held by the Company until the restrictions on such sharesshall have lapsed and the shares shall thereby have become vested or the sharesrepresented thereby have been forfeited hereunder.  Such certificates shall bear the followinglegend:

*“The ownership of this certificateand the shares of stock evidenced hereby and any interest therein are subjectto substantial restrictions on transfer under an Agreement entered into betweenthe registered owner and Guess?, Inc.  Acopy of such Agreement is on file in the office of the Secretary of Guess?,Inc.”*

C.                                     *Delivery of Certificates Upon Lapse of Restricted Period*.  Promptly after the lapse of the RestrictedPeriod as to any shares of Restricted Stock pursuant to Section 4 and thesatisfaction of any and all related tax withholding obligations pursuant toSection 11, the Company shall, as applicable, either remove the notations onany shares of Restricted Stock issued in book entry form which have vested ordeliver to the Grantee a certificate or certificates evidencing the number ofshares of Restricted Stock which have vested (or, in either case, such lessernumber of shares as may be permitted pursuant to Section 11).  The Grantee (or the Beneficiary or PersonalRepresentative of the Grantee in the event of the Grantee’s death orincapacity, as the case may be) shall deliver to the Company anyrepresentations or other documents or assurances as the Company may deem 

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necessary or reasonablydesirable to ensure compliance with all applicable legal and regulatoryrequirements.  The shares so deliveredshall no longer be restricted shares hereunder.

D.                                    *Stock Power; Power of Attorney*.  Concurrent with the execution and delivery ofthis Agreement, the Grantee shall deliver to the Company an executed stockpower in the form attached hereto as Exhibit A, in blank, with respect to theRestricted Stock.  The Grantee, byacceptance of the Award, shall be deemed to appoint, and does so appoint byexecution of this Agreement, the Company and each of its authorizedrepresentatives as the Grantee’s attorney(s) in fact to effect any transfer ofunvested, forfeited shares (or shares otherwise reacquired by the Companyhereunder) to the Company as may be required pursuant to the Plan or thisAgreement and to execute such documents as the Company or such representativesdeem necessary or advisable in connection with any such transfer.

E.                                      *Postponement of Issuance.*  Notwithstanding any other provisions of thisAgreement, the issuance or delivery of any shares of Common Stock (whethersubject to restrictions or unrestricted) may be postponed for such period asmay be required to comply with applicable requirements of any nationalsecurities exchange or any requirements under any law or regulation applicableto the issuance or delivery of such shares. The Company shall not be obligated to issue or deliver any shares ofStock if the issuance or delivery thereof shall constitute a violation of anyprovision of any law or of any regulation of any governmental authority or anynational securities exchange.

11.                                 Withholdingof Tax.  The Company shall reasonablydetermine the amount of any federal, state, local or other income, employment,or other taxes which the Company or any of its affiliates may reasonably beobligated to withhold with respect to the grant, vesting, making of an electionunder Section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code”),or other event with respect to the Restricted Stock.  The Company may, in its sole discretion,withhold and/or reacquire a sufficient number of shares of Restricted Stock inconnection with the vesting of such shares at their then Fair Market Value(determined either as of the date of such withholding or as of the immediatelypreceding trading day, as determined by the Company in its discretion) tosatisfy the amount of any such withholding obligations that arise with respectto the vesting of such shares.  TheCompany may take such action(s) without notice to the Grantee and shall remitto the Grantee the balance of any proceeds from withholding and/or reacquiringsuch shares in excess of the amount reasonably determined to be necessary tosatisfy such withholding obligations. The Grantee shall have no discretion as to the satisfaction of taxwithholding obligations in such manner. If, however, the Grantee makes an election under Section 83(b) of theCode with respect to the Restricted Stock, if any other withholding eventoccurs with respect to the Restricted Stock other than the vesting of suchstock, or if the Company for any reason does not satisfy the withholdingobligations with respect to the vesting of the Restricted Stock as providedabove in this Section 11, the Company shall be entitled to require a cashpayment by or on behalf of the Grantee and/or to deduct from other compensationpayable to the Grantee the amount of any such withholding obligations.

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12.                                 Compliance.  Grantee hereby agrees to cooperate with theCompany, regardless of Grantee’s employment status with the Company, to theextent necessary for the Company to comply with applicable state and federallaws and regulations relating to the Restricted Stock.

13.                                 Notices.  Any notice required or permitted under thisAgreement shall be deemed given when personally delivered, or when deposited ina United States Post Office, postage prepaid, addressed, as appropriate, to theGrantee either at the address on record with the Company or such other addressas may be designated by Grantee in writing to the Company; or to the Company,Attention: Angelina Orona, Stock Plan Administrator, 1444 South Alameda Street,Los Angeles, California  90021, or suchother address as the Company may designate in writing to the Grantee.

14.                                 Failureto Enforce Not a Waiver.  The failureof the Company or the Grantee to enforce at any time any provision of thisAgreement shall in no way be construed to be a waiver of such provision or ofany other provision hereof.

15.                                 GoverningLaw.  This Agreement shall begoverned by and construed according to the laws of the State of Delaware.

16.                                 Amendments.  This Agreement may be amended or modified atany time by an instrument in writing signed by both parties.

17.                                 AgreementNot a Contract of Employment. Neither the grant of the Restricted Stock, this Agreement nor any otheraction taken in connection herewith shall constitute or be evidence of anyagreement or understanding, express or implied, that the Grantee is an employeeof the Company or any subsidiary of the Company.

18.                                 Committee’sPowers.  No provision contained inthis Agreement shall in any way terminate, modify or alter, or be construed orinterpreted as terminating, modifying or altering any of the powers, rights orauthority vested in the Committee or, to the extent delegated, in its delegatepursuant to the terms of the Plan or resolutions adopted in furtherance of thePlan, including, without limitation, the right to make certain determinationsand elections with respect to the Restricted Stock.

19.                                 Section83(b) Election.  The Grantee herebyacknowledged that, with respect to the grant of the Restricted Stock, anelection may be filed by the Grantee with the Internal Revenue Service, within30 days, of the Date of Grant, electing pursuant to Section 83(b) of theCode, to be taxed currently on the fair market value of the Restricted Stock onthe Date of Grant.

THE GRANTEE HEREBYACKNOWLEDGES THAT IT IS THE GRANTEE’S SOLE RESPONSIBILITY AND NOT THERESPONSIBILITY OF THE COMPANY TO TIMELY FILE AN ELECTION UNDER SECTION 83(b) OFTHE CODE, EVEN IF THE GRANTEE REQUESTS THE COMPANY OR ITS REPRESENTATIVE TOMAKE THIS FILING ON THE GRANTEE’S BEHALF.

20.                                 Terminationof this Agreement.  Upon terminationof this Agreement, all rights of the Grantee hereunder shall cease.

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**IN WITNESS WHEREOF**, the Company has causedthis Agreement to be executed on its behalf by a duly authorized officer andthe Grantee has hereunto set his or her hand as of the date and year firstabove written.
| ** ** | **GUESS?, INC.,**           |
|------------|-----------------------------|
| ** ** | **a Delaware  corporation** |
| ** ** | ** **                  |
| ** ** | ** **                  |
|       | By:                         | /s/ Deborah Siegel |   |
|       |                        |
|       | Print Name:  Deborah Siegel |
|       |                        |
|       | Its: Secretary              |
|       |                        |
| ** ** | **GRANTEE**                 |
| ** ** | ** **                  |
|       | /s/ Paul  Marciano          |   |
| * *   | *Signature*                 |
| * *   | * *                    |
|       | Paul Marciano               |   |
| * *   | *Print Name*                |
| * *   | * *                    |
|       | 05457                       |   |
| * *   | *Employee  ID*              |

 

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