**Exhibit10.9**

** **

**EXECUTIVEEMPLOYMENT AGREEMENT**

This **EXECUTIVEEMPLOYMENT AGREEMENT** (the “Agreement”),made as of January 1, 2007 (the “EffectiveDate”), between Guess?, Inc., a Delaware corporation (the “Company”), and Paul Marciano (the “Executive”).

WITNESSETH:

WHEREAS, theExecutive is a co-founder of the Company and is acting as its Co-Chairman andCo-Chief Executive Officer.

WHEREAS,****the Executivehas heretofore been employed by the Company pursuant to an employment agreementmade effective as of August 13, 1996 (the “Prior Agreement”).

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

WHEREAS, the Executive has agreed to focus his timeand energy primarily as the Company’s sole Chief Executive Officer, and iswilling to commit himself to serve the Company, on the terms and conditionsherein provided.

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

WHEREAS, the Company and theExecutive wish to amend and restate the Prior Agreement as evidenced by thisAgreement effective as of the date hereof in order to provide for themodification of certain provisions of the Prior Agreement.

**NOW THEREFORE**, inconsideration of the foregoing, of the mutual promises contained herein and ofother good and valuable consideration, the receipt and sufficiency of which arehereby acknowledged, the parties hereto hereby agree as follows:

1.            **POSITION/DUTIES**.

(a)           During the Employment Term (asdefined in Section 2 below), the Executive shall serve as the Company’s ChiefExecutive Officer and as Vice Chairman of the Board of Directors.** **In this capacity theExecutive shall have such duties, authorities and responsibilities commensuratewith the duties, authorities and responsibilities of persons in similarcapacities in similarly sized companies and such other duties andresponsibilities as the Board of Directors of the Company (the “Board”) shalldesignate that are consistent with the Executive’s position as Chief ExecutiveOfficer.  The Executive shall reportexclusively to the Board.  The Executiveshall have authority as is appropriate to carry out his duties andresponsibilities as set forth in this Agreement.

(b)           During the Employment Term (asdefined below), the Executive shall use the Executive’s best reasonable effortsto perform faithfully and efficiently the duties and responsibilities assignedto the Executive hereunder and shall devote substantially all of the 

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Executive’s business time (excluding periods ofvacation and other approved leaves of absence) as is reasonably necessary tosuch performance of the Executive’s duties with the Company.  Subject to Board approval, Executive may serveon the board of directors or advisory boards of other for profit companies providedthat such service does not create a potential business conflict or theappearance thereof.  Nothing in thisAgreement shall prevent Executive from managing his family’s personalinvestments so long as such activities do not materially interfere with theperformance of the Executive’s duties hereunder or create a potential businessconflict or the appearance thereof.

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

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

(e)           The Executive shall be provided withappropriate office and secretarial facilities in each of the Company’sprincipal executive offices and any other location that the Executivereasonably deems necessary to have an office and support services in order forthe Executive to perform his duties to the Company.

2.            **EMPLOYMENT TERM**.  The Executive’s term of employment under thisAgreement (such term of employment, as it may be extended or terminated, isherein referred to as the “EmploymentTerm”) shall be for a term commencing on the Effective Date and, unlessterminated earlier as provided in Section 7 hereof, ending on the last day ofthe fifth whole Fiscal Year of the Company commencing on or after the EffectiveDate (the “Original Employment Term”),provided that the Employment Term shall be automatically extended, subject toearlier termination as provided in Section 7 hereof, for successive additionalone (1) Fiscal Year periods (the “AdditionalTerms”), unless, on or before 90 days prior to the expiration of theOriginal Employment Term or of any Additional Term, the Company or theExecutive has notified the other in writing that the Employment Term shallterminate at the end of the then-current term.

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

4.            **ANNUAL INCENTIVE BONUS ANDOTHER BONUSES**.  During theEmployment Term, the Executive shall be eligible to participate in the Company’sannual bonus and other incentive compensation plans and programs for theCompany’s senior executives at a level commensurate with the Executive’sposition.  For each whole fiscal year (“FiscalYear”) that begins on or after January 1, 2007 and ends not later than theexpiration of the Employment Term, the Executive shall be eligible to earn anannual cash bonus (the “Bonus”) under the Company’s Annual Incentive BonusPlan, as amended from time to time (the “Bonus Plan”), 

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and, if appropriate, the Company’s 2004 EquityIncentive Plan, as amended from time to time (the “Equity Plan”), based uponthe achievement by the Company and its subsidiaries of performance goals underthe Bonus Plan and under the Equity Plan for each such Fiscal Year establishedby the Compensation Committee of the Board of Directors (the “CompensationCommittee”).  The Compensation Committeeshall establish objective criteria to be used to determine the extent to whichsuch performance goals have been satisfied.  The range of the Bonus opportunity for eachFiscal Year will be as determined by the Compensation Committee based upon theextent to which such performance goals are achieved, provided that the annualtarget 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 Yearshall be one-half the Target Bonus for such year and the maximum Bonus payablepursuant to this Section 4 for any Fiscal Year shall not exceed the amount thatis 300% of the Executive’s Base Salary for such year.  The Bonus, if any, payable to the Executivein respect of any Fiscal Year will be paid at the same time that bonuses arepaid to other executives of the Company, but in any event within seventy-fivedays after the conclusion of such Fiscal Year. After the expiration of the Bonus Plan and the Equity Plan, Executive’sright to receive future Bonus opportunities under such plan is subject toapproval by the stockholders of the Company of a similar successor plan underwhich such opportunity may be granted.  Inaddition to the Bonus, the Executive shall retain the special bonus opportunity(the “Licensing Bonus”) awarded by the Compensation Committee to the Executiveon September 27, 2005, as modified by an action by written consent of theCompensation Committee dated as of November 1, 2005, with respect to theperformance of the Company’s licensing segment. The Compensation Committee may, in its sole discretion, award additionalbonuses to Executive.

5.            **EQUITY BASED INCENTIVEAWARDS**.

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

(i)            If in any whole Fiscal Yearcommencing on or after January 1, 2007 and during the Employment Term, theCompany shall record earnings per share (“Earnings per Share”) growth ofgreater than the Applicable Annual Target as compared to the immediatelypreceding Fiscal Year, then 20% of the Restricted Stock shall become vested asof the first business day following the issuance of the Company’s financialstatement for such year, provided the Executive is then employed by theCompany.  If the Earnings per Sharegrowth requirement is not met for any such year, all of the shares of theRestricted Stock eligible for vesting for that year shall vest on the firstbusiness day following the issuance of the Company’s financial statement forany subsequent Fiscal Year during the Original Employment Term if thecumulative compound average Earnings per Share growth after the 2006 FiscalYear through such subsequent Fiscal Year is more than the Applicable CumulativeTarget for such subsequent Fiscal Year. The “Applicable Annual Target” for each of the first, second and thirdwhole Fiscal Years that commences on or after January 1, 2007 is a growth inEarnings per Share of 15% or more as compared to the immediately precedingFiscal Year.  The “Applicable CumulativeTarget” for each of the first, second and third whole Fiscal Years that 

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commences on or afterJanuary 1, 2007 is a 15% rate of cumulative compound average Earnings per Sharegrowth.  The “Applicable Annual Target”and the “Applicable Cumulative Target” for each of the fourth and fifth wholeFiscal 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.

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

(iii)          The Executive shall have the right tovote the shares of the Restricted Stock, and shall have dividend rights as tosuch shares, before any forfeiture of the shares of the Restricted Stock andwhile such shares are restricted.  Thenumber of shares credited to the Executive shall be subject to adjustment in accordancewith the provisions of the Equity Plan (for example, in connection with thepayment of a stock dividend by the Company).

(iv)          The shares of the Restricted Stock notyet vested or forfeited shall become 100% vested in the event that theExecutive dies or becomes Disabled (within the meaning of Section 7(a)) orthere is a Change in Control, in each case while employed by the Company or anaffiliate during the Employment Term.  Forthis purpose, the term “Change in Control” is used as defined in the EquityPlan except that in no event shall a “Change in Control” be triggered pursuantto clause (A) of such term as so defined unless the Acquiring Person becomes theBeneficial Owner of twenty percent (20%) or more of the then outstanding sharesof Common Stock or the Combined Voting Power of the Company (except pursuant toan offer for all outstanding shares of Common Stock at a price and upon suchterms and conditions as a majority of the Continuing Directors determine to bein the best interests of the Company and its shareholders (other than anAcquiring Person on whose behalf the offer is being made)) in one or more bonafide transactions and such level of ownership of such Common Stock or CombinedVoting Power, as applicable, exceeds the aggregate level of ownership of theMarcianos 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 inpart for the benefit of one or more of them or their family members, or anyother entity controlled by one or more of them, and any other capitalized termused in such sentence is used as defined in the Equity Plan if not otherwisedefined in this Agreement.  If theExecutive terminates his employment with the Company for “Good Reason” (as definedin Section 7(e) of this Agreement), or is terminated by the Company without “Cause”(as defined in Section 7(c) of this 

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Agreement) or for Disability,the shares of the Restricted Stock not yet vested or forfeited shall become100% vested.

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

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

(b)           **PERFORMANCE SHARE AWARDS**.  The Company shall grant the Executive underthe Equity Plan at the completion of each whole Fiscal Year commencing on andafter January 1, 2007 and during the Employment Term shares of the Company’scommon stock (“Performance Shares”) based upon the achievement by the Companyand its subsidiaries of performance goals under the Equity Plan for each suchFiscal Year established by the Compensation Committee.  The Compensation Committee shall establishobjective criteria to be used to determine the extent to which such performancegoals have been satisfied.  PerformanceShares 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 particularFiscal Year will be subject to the standard vesting schedule established by theCompensation Committee for Performance Share grants in that year (the currentvesting schedule is a 4-year vesting schedule). After the expiration of the Equity Plan, Executive’s right to receivefuture grants of Performance Shares is subject to approval by the stockholdersof the Company of a similar successor plan under which such awards may begranted.

(c)           **STOCK OPTION AWARDS**.  The Company shall grant the Executive underthe Equity Plan at the completion of each whole Fiscal Year commencing on orafter January 1, 2007 and during the Employment Term stock options to purchasethe Company’s common stock at an exercise price of not less than the fairmarket value of such stock on the grant date (“Stock Options”) based upon theachievement by the Company and its subsidiaries of performance goals under theEquity Plan for each such Fiscal Year established by the CompensationCommittee.  The Compensation Committeeshall establish objective criteria to be used to determine the extent to whichsuch performance goals have been satisfied. Stock Options for each whole Fiscal Year during the Employment Term willbe granted at a grant-date Black-Scholes value of 55% of the Executive’s BaseSalary for such Fiscal Year (i.e., $550,000 for 2007).  Stock Options granted in any particularFiscal Year will be subject to the standard vesting schedule established by theCompensation Committee for Stock Option grants in that year (the currentvesting schedule is a 4-year vesting schedule). After the expiration of the 

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Equity Plan, Executive’s right to receive futuregrants of Stock Options is subject to approval by the stockholders of theCompany of a similar successor plan under which such awards may be granted.

(d)           **DISCRETIONARYGRANTS**.  In addition to theEmployment Inducement, Performance Share and Stock Option Awards under Section5(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 Termin such long-term incentive plans and programs as may be in effect from time totime in accordance with the Company’s compensation practices and the terms andprovisions of any such plans or programs.

6.            **EMPLOYEE BENEFITS**.

(a)           **BENEFITPLANS**.  The Executive shall beentitled 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 limitationsupplemental executive retirement plans) or welfare benefits that the Companyhas adopted or may adopt, maintain or contribute to for the benefit of itssenior executives at a level commensurate with the Executive’s positionssubject to satisfying the applicable eligibility requirements.  The Executive shall at all times during theEmployment Term be entitled to participate in the Guess?, Inc. SupplementalExecutive Retirement Plan, as in effect on January 1, 2006, and anydeferred compensation plan which may be maintained by the Company from time totime.

(b)           **VACATION**.  The Executive shall be entitled to accrue annualpaid vacation in accordance with the Company’s policy applicable to seniorexecutives, 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 asthe Executive elects with due regard to the needs of the Company.  Executive shall not be permitted to accruemore than a total of twenty five (25) vacation days at any time.  Once Executive reaches the maximum accrual,Executive shall not accrue any additional vacation days until a portion ofExecutive’s accrued vacation time is used.

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

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

(e)           **LIFETIME RETIREE MEDICALBENEFIT**.  The Company shall provide the Executive andhis eligible family members with Post-Retirement Health Benefits at its expensecommencing upon expiration of the Employment Term for any reason other than atermination for Cause, in which case the Company shall have no obligation toprovide Post-Retirement Health Benefits. The term “Post-Retirement HealthBenefits” means the following:

(i)            health benefits (including medical,prescription, dental and vision coverage, if and to the extent applicable) forthe remainder of the Executive’s life under the plans provided to the Company’sexecutive officers and their eligible family 

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members, as in effectfrom time to time; provided that the Post-Retirement Health Benefits maybe made secondary to any other benefits to which the Executive may be entitledunder another employer-provided plan or a governmental plan such as Medicare;or

(ii)           if the Company is unable, at anypoint, to provide such coverage under any such plans, the Company will pay theExecutive a lump-sum cash payment that will equal the present value of the costof such coverage based on the actuarial equivalent assumptions set forth in theGuess?, Inc. Supplemental Executive Retirement Plan and a reasonable forecastof increases in the cost of such coverage for that portion of the period followingthe expiration of the Employment Term for which such coverage could not beprovided (in either case, such benefits are referred to as the “Post-RetirementHealth Benefits”).

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

(g)           **BUSINESSAND ENTERTAINMENT EXPENSES**. Upon presentation of appropriate documentation, the Executive shall bereimbursed in accordance with the Company’s expense reimbursement policy forall reasonable and necessary business and entertainment expenses incurred inconnection 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 shallestablish a “rabbi trust” for the benefit of the Executive and fund it withcash or cash equivalents sufficient to fully pay when due and payable allpayments that potentially would be required to be made under Section 8(d)hereof if the Executive were to be terminated without cause.

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

(a)           **DISABILITY**.  Upon written notice by the Company to theExecutive of termination due to Disability, while the Executive remainsDisabled.  For purposes of thisAgreement, “Disabled” and “Disability”shall (i) have the meaning defined under the Company’s then-current long-termdisability insurance plan, policy, program or contract as entitles theExecutive to payment of disability benefits thereunder, or (ii) if there shallbe no such plan, 

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policy, program or contract, mean permanent and totaldisability 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 theExecutive.

(c)           **CAUSE**.  Immediately upon written notice by theCompany to the Executive of a termination for Cause.  “Cause”shall mean (i) Executive’s conviction or plea of nolo contendere to a felony orany crime involving moral turpitude; (ii) a willful act of theft, embezzlementor misappropriation from the Company; or (iii) a determination by the Boardthat Executive has willfully and continuously failed to perform substantiallythe Executive’s duties (other than any such failure resulting from theExecutive’s Disability or incapacity due to bodily injury or physical or mentalillness), after (A) a written demand for substantial performance is deliveredto the Executive by the Board which specifically identifies the manner in whichthe Board believes that the Executive has not substantially performed theExecutive’s duties and provides the Executive with the opportunity to correctsuch failure if, and only if, such failure is capable of cure; and (B) the Executive’sfailure to correct such failure which is capable of cure within 30 days ofreceipt of the demand for performance.  Forthe avoidance of doubt, the parties expressly agree that only Cause pursuant toSection 7(c)(iii) shall be deemed capable of cure.  Notwithstanding the foregoing, “Cause” shallnot include any act or omission that the Executive believes in good faith tohave been in or not opposed to the interest of the Company (without intent ofExecutive to gain therefrom, directly or indirectly, a profit to which he wasnot legally entitled). The Company may only terminate the Executive’s employmentfor Cause if (A) a determination that Cause exists is made and approved by threefourths of the independent directors of the Company’s Board, (B) for atermination 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 suchdetermination, and (C) for a termination for Cause under Section 7(c)(iii), theExecutive and his legal counsel are given the opportunity to address suchmeeting.  In the event that the Board hasso determined in good faith that Cause exists, the Board shall have noobligation to terminate the Executive’s employment if the Board determines inits sole discretion that such a decision not to terminate the Executive’semployment is in the best interest of the Company.

(d)           **WITHOUTCAUSE**.  Upon written notice bythe Company to the Executive of an involuntary termination without Cause andother than due to death or Disability prior to age sixty-five.

(e)           **GOODREASON**.  Upon written noticeby the Executive to the Company of termination for Good Reason unless thereasons for any proposed termination for Good Reason are remedied in allmaterial respects by the Company within thirty (30) days following writtennotification by the Executive to the Company. “Good Reason” means theoccurrence of any one or more of the following events prior to age sixty-five unlessExecutive specifically agrees in writing that such event shall not be GoodReason:

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

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

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

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

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

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

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

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

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

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

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

8.            **CONSEQUENCES OFTERMINATION**.  Any terminationpayments made and benefits provided under this Agreement to the Executive shallbe in lieu of any termination or severance payments or benefits for which theExecutive may be eligible under any of the plans, policies or programs of theCompany or its affiliates.  Except to theextent otherwise provided in this Agreement, all benefits and awards under theCompany’s compensation and benefit programs shall be subject to the terms andconditions of the plan or arrangement under which such benefits accrue, aregranted or are awarded.  The followingamounts and benefits shall be due to the Executive:

(a)           **DISABILITY**.  Upon such termination, the Company shall payor provide the Executive (i) any unpaid Base Salary through the date oftermination and any accrued vacation in accordance with Company policy; (ii)any unpaid Bonus earned with respect to any Fiscal Year ending on or precedingthe date of termination; (iii) reimbursement for any unreimbursed business expensesincurred through the date of termination; and (iv) all other payments, benefitsor perquisites to which the Executive may be entitled under the terms of anyapplicable compensation arrangement or benefit, equity or perquisite plan orprogram or grant or this Agreement (including any related gross-up)(collectively, “Accrued Amounts”).  The Executive will also be paid a pro-rata portionof the Executive’s Bonus and Licensing Bonus for the performance year in whichthe Executive’s termination occurs, payable at the time that 

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annual Bonuses are paid to other senior executives(determined by multiplying the amount the Executive would have received basedupon target performance had employment continued through the end of theperformance year by a fraction, the numerator of which is the number of daysduring the performance year of termination that the Executive is employed by theCompany and the denominator of which is 365).

(b)           **DEATH**.  In the event the Employment Term ends onaccount of the Executive’s death, the Executive’s estate (or to the extent abeneficiary has been designated in accordance with a program, the beneficiary undersuch program) shall be entitled to any Accrued Amounts.  The Executive’s estate (or beneficiary) willalso be paid a pro-rata portion of the Executive’s Bonus and Licensing Bonusfor the performance year in which the Executive’s termination occurs, payableat the time that annual Bonuses are paid to other senior executives (determinedby multiplying the amount the Executive would have received based upon targetperformance had employment continued through the end of the performance year bya fraction, the numerator of which is the number of days during the performanceyear of termination that the Executive is employed by the Company and thedenominator of which is 365).

(c)           **TERMINATIONFOR CAUSE**.  If the Executive’semployment should be terminated by the Company for Cause or by the Executivewithout Good Reason, the Company shall pay to the Executive any AccruedAmounts.

(d)           **TERMINATIONWITHOUT CAUSE OR FOR GOOD REASON**. If the Executive’s employment by the Company is terminated by theCompany other than for Cause (other than a termination due to Disability ordeath) or by the Executive for Good Reason, the Company shall pay or providethe Executive with

(i)            the Accrued Amounts;

(ii)           a pro-rata portion of the Executive’sBonus for the performance year in which the Executive’s termination occurs,payable at the time that annual Bonuses are paid to other senior executives, determinedby multiplying the amount the Executive would have received based upon actualperformance had employment continued through the end of the performance year(but in no event less than the amount for target performance), by a fraction,the numerator of which is the number of days during the performance year oftermination that the Executive is employed by the Company and the denominatorof which is 365;

(iii)          $5 million if the last day of theExecutive’s employment by the Company occurs in 2007 or $3.5 million if thelast day of the Executive’s employment by the Company occurs on or afterJanuary 1, 2008 but before December 31, 2012 (for purposes of clarity, theCompany 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 afterDecember 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 multipliedby (B) three, payable in a single lump-sum, with such payment being made on theearliest payroll date that 

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does not result inadverse tax consequences to the Executive under Section 409A of the Code; and

(v)           two years of additional servicecredit and age for benefit accrual, early retirement reduction and vestingpurposes under the Guess?, Inc. Supplemental Executive Retirement Plan.

In addition, the Company, at its election, shall have the option in itsfull and absolute discretion to enter into a two-year consulting agreement withthe Executive providing for continuation of 50% of Base Pay annually insubstantially the same form as set forth in Appendix A below.  Notwithstanding anything to the contrarycontained herein, the Company shall have no obligation to provide any of themonetary payments and/or benefits provided for in this Section 8(d) (other thanAccrued Amounts) unless and until Executive executes an effective generalrelease of all claims in favor of the Company in a form acceptable to theCompany (the “Release”).  For theavoidance of doubt, Executive’s execution of the Release is a conditionprecedent to any obligation of the Company to provide the monetary paymentsand/or benefits provided for in this Section 8(d) (other than Accrued Amounts).

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

(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’sBonus for the performance year in which the Executive’s termination occurs,payable at the time that annual Bonuses are paid to other senior executives(determined by multiplying the amount the Executive would have received basedupon target performance had employment continued through the end of theperformance year by a fraction, the numerator of which is the number of daysduring the performance year of termination that the Executive is employed bythe Company and the denominator of which is 365); and

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

In addition, the Company shall enter into a two-year consultingagreement with the Executive providing for continuation of 50% of Base Payannually in substantially the same form as set forth in Appendix A below.

9.            **SECTION 4999 EXCISETAX. **If any payments, rights or benefits(whether pursuant to the terms of this Agreement or any other plan, arrangementor agreement of Executive with the Company or any person affiliated with theCompany) (the “Payments”) received or to be received by Executive will besubject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (orany similar tax that may hereafter be imposed), then the Company 

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shall pay toExecutive an amount in addition to the Payments (the “Gross-Up Payment”) ascalculated below.  The Gross Up Paymentshall be in an amount such that, after deduction of any Excise Tax on thePayments and any federal, state and local income and employment tax and ExciseTax on the Gross Up Payment, but before deduction for any federal, state orlocal income and employment tax on the Payments, the net amount retained by theExecutive shall be equal to the Payments. The process for calculating the Excise Tax, determining the amount ofany Gross-Up Payment and other procedures relating to this Section are setforth in Appendix B attached hereto.  Forpurposes of making the determinations and calculations required herein, theAccounting Firm (as defined in Appendix B) may rely on reasonable, good faithinterpretations concerning the application of Section 280G and 4999 of theCode, provided that the Accounting Firm shall make such determinations andcalculations on the basis of “substantial authority” (within the meaning ofSection 6662 of the Code) and shall provide opinions to that effect to both theCompany and Executive.

10.          **CONFIDENTIALITY**.  The Executive agrees that the Executive shallnot, directly or indirectly, use, make available, sell, disclose or otherwisecommunicate to any person, other than in the course of the Executive’semployment and for the benefit of the Company, either during the period of theExecutive’s employment or at any time thereafter, any nonpublic, proprietary orconfidential information, knowledge or data relating to the Company, any of itssubsidiaries, affiliated companies or businesses, which shall have been obtainedby the Executive during the Executive’s employment by the Company.  The foregoing shall not apply to informationthat (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 throughno wrongful act of the Executive or any representative of the Executive; or(iii) the Executive is required to disclose by applicable law, regulation orlegal process (provided that the Executive provides the Company with prior noticeof the contemplated disclosure and reasonably cooperates with the Company atits expense in seeking a protective order or other appropriate protection ofsuch information).  Notwithstandingclauses (i) and (ii) of the preceding sentence, the Executive’s obligation tomaintain such disclosed information in confidence shall not terminate whereonly portions of the information are in the public domain.

11.          **ATTORNEY’SFEES**.  To the extent permitted by law, allreasonable costs and expenses incurred by the Executive in evaluating and negotiatingthe 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-frivolouseffort to secure or preserve or establish entitlement to compensation andbenefits under this Agreement, the Company shall, to the extent permitted bylaw and regardless of the outcome of such effort, reimburse Executive monthly forsuch fees and expenses.

12.          **NO ASSIGNMENT**.

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

(b)           The Company may assign this Agreementto any successor to all or substantially all of the business and/or assets ofthe Company provided the Company shall 

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require such successor to expressly assume and agreeto perform this Agreement in the same manner and to the same extent that theCompany would be required to perform it if no such succession had taken placeand shall deliver a copy of such assignment to the Executive.

13.          **NOTICE**.  For the purpose of this Agreement, noticesand all other communications provided for in this Agreement shall be in writingand shall be deemed to have been duly given (a) on the date of delivery ifdelivered by hand, (b) on the date of transmission, if delivered by confirmedfacsimile, (c) on the first business day following the date of deposit ifdelivered by guaranteed overnight delivery service, or (d) on the fourthbusiness day following the date delivered or mailed by United States registeredor certified mail, return receipt requested, postage prepaid, addressed asfollows:

If to the Executive:

At the address (or to thefacsimile number) shownon the records of the Company

If to the Company:

Guess?, Inc.1444 South Alameda StreetLos Angeles, California 90021Attention:  General CounselFacsimile No.:   (213) 765-0911

orto such other address as either party may have furnished to the other inwriting in accordance herewith, except that notices of change of address shallbe effective only upon receipt.

14.          **SECTION HEADINGS;INCONSISTENCY**.  The sectionheadings used in this Agreement are included solely for convenience and shallnot affect, or be used in connection with, the interpretation of thisAgreement.  In the event of anyinconsistency between this Agreement and any other agreement (including but notlimited to any option, stock, long-term incentive or other equity awardagreement), plan, program, policy or practice (collectively, “Other Provision”) of the Company theterms of this Agreement shall control over such Other Provision to the extentthat the terms of this Agreement are more beneficial to the Executive.

15.          **SEVERABILITY**.  The provisions of this Agreement shall bedeemed severable and the invalidity of unenforceability of any provision shallnot affect the validity or enforceability of the other provisions hereof.

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

17.          **DISPUTE RESOLUTION**.  In the event of any controversy, dispute orclaim between the parties under, arising out of or related to this Agreement(including but not limited 

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to, claims relating to breach, termination of thisAgreement, or the performance of a party under this Agreement) whether based oncontract, tort, statute or other legal theory (collectively referred tohereinafter as “Disputes”), the parties shall follow the dispute resolutionprocedures set forth below. Any Dispute shall be settled exclusively byarbitration, conducted before a single arbitrator in Los Angeles, California,administered by the American Arbitration Association (“AAA”) in accordance with its Commercial Arbitration Rules then ineffect.  The parties agree to (i) appointan arbitrator who is knowledgeable in employment and human resource mattersand, to the extent possible, the industry in which the Company operates, andinstruct the arbitrator to follow substantive rules of law; (ii) require thetestimony to be transcribed; and (iii) require the award to be accompanied byfindings of act and a statement of reasons for the decision.  The arbitrator shall have the authority topermit discovery, to the extent deemed appropriate by the arbitrator, uponrequest of a party.  The arbitrator shallhave no power or authority to add to or detract from the written agreement ofthe parties.  If the parties cannot agreeupon an arbitrator within ten (10) days after demand by either of them, eitheror both parties may request the American Arbitration Association name a panelof five (5) arbitrators.  The Companyshall strike the names of two (2) off this list, the Executive shall alsostrike two (2) names, and the remaining name shall be the arbitrator.  The parties shall stipulate that arbitrationshall be completed within ninety (90) days. The decision of the arbitrator will be final and binding upon theparties hereto.  Judgment may be enteredon the arbitrator’s award in any court having jurisdiction.  The Company shall bear the costs of thearbitrator and any related forum fee.

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

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

20.          **MISCELLANEOUS**.  No provision of this Agreement may bemodified, waived or discharged unless such waiver, modification or discharge isagreed to in writing and signed by the Executive and such officer or directoras may be designated by the Board.  Nowaiver by either party hereto at any time of any breach by the other partyhereto of, or compliance with, any condition or provision of this Agreement tobe performed by such other party shall be deemed a waiver of similar ordissimilar provisions or conditions at the same or at any prior or subsequenttime.  This Agreement together with allexhibits hereto sets forth the entire agreement of the parties hereto inrespect 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 whichare not expressly set forth in this Agreement. The validity, interpretation, construction and performance of thisAgreement shall be governed by the laws of the State of California withoutregard to its conflicts of law principles. Notwithstanding 

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the foregoing, the Company’s rights pursuant to anyconfidentiality, proprietary information, assignment of inventions or similaragreement shall survive and continue in effect.

21.           **PAYMENTOF COMPENSATION. **Notwithstandinganything in this Agreement or elsewhere to the contrary:

(a)           If payment or provision of any amountor other benefit that is “deferred compensation” subject to Section 409A of theCode at the time otherwise specified in this Agreement or elsewhere wouldsubject such amount or benefit to additional tax pursuant to Section409A(a)(1)(B) of the Code, and if payment or provision thereof at a later datewould avoid any such additional tax, then the payment or provision thereofshall be postponed to the earliest date on which such amount or benefit can bepaid or provided without incurring any such additional tax.  In the event that deferred payment isrequired in order to comply with Section 409A, such payment shall beaccumulated and paid in a single lump sum on such earliest date together withinterest 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 thepayment should otherwise have been provided.

(b)           If any payment or benefit permittedor required under this Agreement, or otherwise, is reasonably determined byeither party to be subject for any reason to a material risk of additional taxpursuant to Section 409A(a)(1)(B) of the Code, including when final regulationsand issued thereunder, then the parties shall promptly agree in good faith onappropriate provisions to avoid such risk without materially changing theeconomic value of this Agreement to either party.

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

23.          **REPRESENTATIONS**.  Except as otherwise disclosed to the Companyin writing, the Executive represents and warrants to the Company that theExecutive has the legal right to enter into this Agreement and to perform allof the obligations on the Executive’s part to be performed hereunder inaccordance with its terms and that the Executive is not a party to anyagreement or understanding, written or oral, which could prevent the Executivefrom entering into this Agreement or performing all of the Executive’sobligations hereunder.

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

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25.          **NON-EXCLUSIVITYOF RIGHTS**.  Nothing in thisAgreement shall prevent or limit the Executive’s continuing or futureparticipation in any benefit, bonus, incentive or other plan or programprovided by the Company and for which the Executive may qualify, nor shallanything herein limit or otherwise affect such rights as the Executive may haveunder any restricted stock unit or other agreement with the Company or any ofits affiliated companies.  Except asotherwise provided herein, amounts and benefits which are vested benefits orwhich the Executive is otherwise entitled to receive under any plan, program,agreement or arrangement of the Company at or subsequent to the date oftermination shall be payable in accordance with such plan or program.

26.          **SURVIVAL**.  The respective obligations of, and benefitsafforded to, the Company and Executive that by their express terms or clearintent survive termination of 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 Executive’semployment with the Company, and will remain in full force and effect accordingto their terms.

27.          **AGREEMENTOF THE PARTIES**.  The languageused in this Agreement will be deemed to be the language chosen by the partieshereto to express their mutual intent, and no rule of strict construction willbe applied against any party hereto. Neither Executive nor the Company shall be entitled to any presumptionin connection with any determination made hereunder in connection with anyarbitration, judicial or administrative proceeding relating to or arising underthis Agreement.

**IN WITNESS WHEREOF**,the parties hereto have executed this Agreement as of the date first writtenabove.
|        | **GUESS?, INC.**  |
|--------|-------------------|
|   | ** **        |
|   | By:               | /s/ Carlos  Alberini |
|   | Name:             | Carlos Alberini |
|   | Its:              | President and  COO |
|   | ** **        |
|   | ** **        |
|   | **PAUL MARCIANO** |
|   | ** **        |
|   | ** **        |
|   | /s/ Paul Marciano |
|        |                   |  |  |  |

 

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**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 ChiefExecutive Officer and as a member of the Company’s Board of Directors (the “Board”);

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

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

NOW, THEREFORE, in consideration of the covenants setforth herein and for other good and valuable consideration, the receipt andadequacy of which are hereby acknowledged, the parties, intending to be legallybound, agree as follows:

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

2.             Consulting Services.  Marciano shall provide such consultingservices to the Company as reasonably requested by the Board from time totime.  These services may include but arenot limited to actively participating in major marketing or sales initiatives,performing any transition and integration services related to the Company’sbusiness and cooperating with the Company regarding any litigation initiatedinvolving matters of which Marciano has particular knowledge.  Marciano agrees to be available up to sevendays per month during the Consulting Period to perform the ConsultingServices.  The Consulting Services willbe performed at such times as are reasonably requested by the Company after reasonableconsultation with Marciano.  Marcianoshall provide these services in Los Angeles, California, provided that Marcianoshall be required to travel for business and client meetings as reasonablyrequested by the Company.

3.             Fees.  As compensation for the Consulting Services,the Company shall pay Marciano fifty percent of Marciano’s Base Salary as ofthe Retirement Date per annum during the Consulting Period.  Fees shall be paid monthly in arrears by the15th day of the following month.  ShouldMarciano die or becomedisabled during the Consulting Period, the Company shall make a lump sum cashpayment to Marciano (or, in the event of his death, to his estate) of an amountequal to the remaining payments owed through the end of the Consulting Period. 

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Marcianoshall not be entitled to participate, and shall not participate in any employeebenefit plan providing benefits to Company employees, whether presently inforce or adopted subsequent to this Consulting Agreement, with respect to hisConsulting Services.  Notwithstanding theforegoing, Marciano shall retain all compensation and benefits that continuepast his Retirement Date pursuant to the terms of his Employment Agreement withthe Company dated January 1, 2007 or otherwise. All reasonable and necessary business expenses incurred by Marciano inthe performance of the Consulting Services shall be promptly reimbursed by theCompany in accordance with the Company’s standard expense reimbursementpolicies applicable to independent contractors.

4.             Status.  Marciano acknowledges and agrees that hisstatus at all times during the Consulting Period shall be that of anindependent contractor.  Marciano herebywaives any rights to be treated as an employee or deemed employee of theCompany or any of its affiliates for any purpose following his termination ofemployment at the Retirement Date except as provided under his EmploymentAgreement.  The parties herebyacknowledge and agree that the compensation provided for in Section 4 shallrepresent fees for Consulting Services provided by Marciano as an independentcontractor, and shall be paid without any deductions or withholdings for taxes.

5.             Retained Property.  During the Consulting Period, Marciano shallretain all property of the Company in his possession, including, but notlimited to, credit cards, security key cards, telephone cards, car servicecards, computer software or hardware, Company identification cards, Companyrecords and copies of records, correspondence and copies of correspondence andother books or manuals issued by the Company.

6.             Assignability.  Marciano may not assign or transfer thisConsulting Agreement or any of Marciano’s rights, duties or obligationshereunder.  The Company may assign thisConsulting Agreement to any person or entity acquiring all or substantially allof 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 thefull and complete understanding and agreement of the parties hereto withrespect to engaging Marciano as a consultant to the Company.  This Consulting Agreement may not be changedor amended orally, but only by an agreement in writing signed by the partyagainst whom enforcement of any waiver, change, modification or discharge issought.

8.             Divisibility.  If any one or more of the provisions of thisConsulting Agreement or any application thereof shall be invalid, illegal orunenforceable in any respect, the validity, legality or enforceability of theremaining provisions and other application thereof shall not in any way beaffected or impaired.

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

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

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

INWITNESS WHEREOF, the undersigned have duly executed this Consulting Agreementas of the day and year first above written.
|   |          |
|--------|---------------|
|   | PAUL MARCIANO |
|   |          |
|   |          |
|   |          |
|   |          |
|   |          |
|   | COMPANY       |
|   |          |
|   |          |
|   | By:           |   |
|   |          |   |
|   | Its:          |   |
|        |               |  |  |

 

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**APPENDIXB**

**TAX GROSS-UP PAYMENT RULES ANDPROCEDURES**

1.             Subjectto Paragraph 3 below, all determinations required to be made under Section 9 ofthis Agreement, including whether a Gross-Up Payment is required and the amountof such Gross-Up Payment, shall be made by an accounting firm (the “AccountingFirm”) selected in accordance with Paragraph 2 below.  The Accounting Firm shall provide detailedsupporting calculations both to the Company and Executive within 15 businessdays of the event that results in the potential for an excise tax liability forthe Executive, which could include but is not limited to a Change in Controland the subsequent vesting of any cash payments or awards, or the Executive’stermination of employment, or such earlier time as is required by theCompany.  The initial Gross-Up Payment,if any, as determined pursuant to this Paragraph 1, shall be paid on theExecutive’s behalf to the applicable taxing authorities within five (5) days ofthe receipt of the Accounting Firm’s determination.  If the Accounting Firm determines that noExcise Tax is payable to the Executive, it shall furnish the Executive with awritten report indicating that he has substantial authority not to report anyExcise Tax on his federal income tax return. Any determination by the Accounting Firm shall be binding upon theCompany and Executive.  As a result ofthe uncertainty in the application of Section 4999 of the Code at the time ofthe initial determination by the Accounting Firm hereunder, it is possible thatGross-Up Payments which will not have been made by the Company should have beenmade (“Underpayment”), consistent with the calculations required to be madehereunder.  In the event that the Companyexhausts its remedies pursuant to Paragraph 3 below and Executive thereafter isrequired to make a payment or additional payment of any Excise Tax, theAccounting Firm shall determine the amount of the Underpayment that hasoccurred and any such Underpayment, increased by all applicable interest andpenalties associated with the Underpayment, shall be promptly paid by theCompany to or for the benefit of Executive. For purposes of determining the amount of the Gross-Up Payment,Executive shall be deemed to pay federal income tax at the highest marginalrate of federal income taxation in the calendar year in which the Gross-UpPayment is to be made and state and local income taxes on earned income at thehighest marginal rate of taxation in the state and locality of Executive’sresidence on the Effective Date of Termination, net of the maximum reduction infederal income taxes which could be obtained from deduction of such state andlocal taxes.

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

3.             Executiveshall notify the Company in writing of any claim by the Internal Revenue Servicethat, if successful, would require the payment by the Company of the Gross-UpPayment.  Such notification shall begiven as soon as practicable but no later than fifteen (15) business days afterExecutive knows of such claim and shall apprise the Company of the nature ofsuch claim and the date on which such claim is requested to be paid.  Executive shall not pay 

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suchclaim prior to the expiration of the period ending on the date that any paymentof taxes with respect to such claim is due or the thirty day period followingthe date on which Executive gives such notice to the Company, whichever periodis shorter.  If the Company notifiesExecutive in writing prior to the expiration of such period that it desires tocontest such claim, Executive shall (i) give the Company any informationreasonably requested by the Company relating to such claim, (ii) take suchaction in connection with contesting such claim as the Company shall reasonablyrequest in writing from time to time, including, without limitation, acceptinglegal representation with respect to such claim by an attorney reasonablyselected by the Company, (iii) cooperate with the Company in good faith inorder effectively to contest such claim, and (iv)  permit the Company to participate in anyproceedings relating to such claim; provided, however, that the Company shallbear and pay directly all costs and expenses (including attorneys fees and anyadditional interest and penalties) incurred in connection with such contest andshall indemnify and hold Executive harmless, on an after-tax basis, for anyExcise Tax or income tax, including interest and penalties with respectthereto, imposed as a result of such representation and payment of costs andexpenses.  Without limitation of theforegoing provisions of this Paragraph 3, the Company shall control allproceedings taken in connection with such contest and, at its sole option, maypursue or forego any and all administrative appeals, proceedings, hearings andconferences with the taxing authority in respect to such claim and may, at itssole option, either direct Executive to pay the tax claimed and sue for arefund or contest the claim in any permissible manner, and Executive agrees toprosecute such contest to a determination before any administrative tribunal,in a court of initial jurisdiction and in one or more appellate courts, as theCompany shall determine; provided, however, that if the Company directsExecutive to pay such claim and sue for a refund, the Company shall advance theamount of such payment to Executive, on an interest-free basis and shallindemnify and hold Executive harmless, on an after-tax basis, from any ExciseTax and income tax, including interest or penalties with respect thereto,imposed with respect to such advance or with respect to any imputed income withrespect to such advance; and further provided that any extension of the statuteof limitations relating to payment of taxes for the taxable year of Executivewith respect to which such contested amount is claimed to be due is limitedsolely to such contested amount. Furthermore, the Company’s control of the contest shall be limited toissues with respect to which a Gross-Up Payment would be payable hereunder andExecutive shall be entitled to settle or contest, as the case may be, any otherissue raised by the Internal Revenue Service or any other authority.

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

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